Liens

Liens are legal claims to property as security for an unpaid debt. Most liens are voluntary as a condition for gaining access to credit. A cosigner for a loan may appear as a lien holder until the loan balance is paid in full. Mortgage companies and automobile lenders will have a lien on that collateral until the original loan is paid in full. These are everyday liens that many of us have as a result of using credit secured by collateral.

Liens can also be placed on property involuntarily because the debtor defaulted on the debt. A mechanic can place a lien on an automobile or other property under repair if the owner fails to pay the full cost of those repairs. Governments can also place a tax lien on property if a taxpayer fails to pay a substantial tax liability. A tax lien is the government’s way of securing what would otherwise be an unsecured debt.

Expect a paid tax lien to remain on your credit report for 7 years after the final payment. Unpaid tax liens remain for 15 years.

Liens appear on credit reports to distinguish debts that are secured by property. Many secured loans will even list the loan payoff date on your credit report as the date that the lien holder will relinquish the claim to that property.