How Much Will My Credit Score Go Down With a Tax Lien?

If you have unpaid taxes, the IRS may file a tax lien against you, which significantly affects your credit score and history. The amount of damage caused by a lien varies, but you can expect a significant decline in your score until you pay the debt or enter into a satisfactory payment arrangement with the IRS.

IRS Tax Liens

A tax lien is a public announcement by the IRS that it has a claim on your assets because you owe federal taxes. Following the filing of a tax lien, the IRS can take steps to seize your assets, such as your bank account, to satisfy your tax debt. An IRS tax lien is a matter of public record, and credit reporting bureaus often include tax liens on consumer credit reports.

Credit Score

Your credit score is a number used by some lenders, employers and landlords to make decisions about your creditworthiness. A high number is a sign of creditworthiness, while a low credit score can significantly impede your ability to get credit or secure employment. Companies that develop and sell credit scores compute your score using information available in your credit reports.

Tax Lien Damage

Tax liens have a significant negative impact on your credit score. The exact amount of damage to your score varies by the "scoring system" used to compute your score and by other information included in your credit report, according to Maxine Sweet, Vice-President of Consumer Affairs for Experian. Some people have reported noticing a 100 point reduction after the IRS filed a tax lien against them.

Lien Withdrawal

Until 2011, a tax lien remained on your credit report for seven years after you paid off your tax debt. The IRS changed its policies, however, and allows you to request a withdrawal of the lien in certain circumstances. These circumstances include having paid your debt in full or, if your debt is under $25,000, setting up an installment payment agreement with the IRS that allows the IRS to withdraw your payments directly from your bank account. Once the IRS withdraws the lien, the lien no longer appears on your credit report, nor does it continue to affect your credit score.