Why is My Credit Score Going Down When I Pay on Time?

In the United States,we can all agree that it's very important to maintain a healthy credit score, but why is that your credit scores goes down even though you're paying on time. There can be a number of reasons as to why your credit score went down despite making all your payments on time.

Why Is My Credit Score Going Down When I Pay On Time?

Your credit score can go down when you pay on time for a number of reasons. For example, if you apply for a new credit card or loan, you utilize more of your available credit, or open new accounts, your credit score can still go down despite paying on time. We will now discuss the reasons why your credit score may go down despite making all your payments on time in more detail below.

Applying for Credit Cards or Loans

Every time you apply for a new credit card, loan, or credit line increase, the bank or lender places what is known as a hard inquiry (hard pull) on your credit report. A hard inquiry will remain on your credit report for two years and can lower your credit score by 5 to 10 points. So, if your credit score went down even though you're making all of your payments on time, a credit card or loan application may be the culprit for the drop in your credit score.

Utilizing More Credit

If you are using your credit cards and racking up more debt, your credit score can go down even if you're paying on time. This is so because you're utilizing more of your available credit and the credit reporting bureaus do not like to see your credit utilization increasing month after month. As a rule of thumb, you should try to keep your credit utilization below 30%, and even then we have noticed that as your credit utilization increases, your credit score tends to decrease. So, this might be another reason as to why your credit score has gone down even though you've paid on time. Also, some users have reported that too little credit utilization is bad, as well, for your credit score. So, try to use your credit cards for as many purchases as you can afford to pay off at the end of the month. This is the advice that we follow.

Paying Off a Loan

Although paying off a loan can be one of the most rewarding experiences you have, it might not be the best thing for your credit score. This is so because when you pay off a car loan or student loan, this decreases the mix of credit that you have. Having a good credit mix is something that increases your credit score. That said, you should always strive to pay off your loans and don't postpone paying them off to keep a high credit score.

Opening a New Account

Opening a new account can temporarily cause a drop in your credit score. Opening a new account can lower your credit score because it decreases the average age of all your account. For example, if you have 2 years of credit history with one open credit card, and you open another account, the average account age will decrease, causing a slight drop in your credit score. So, this may be an additional reason as to why your credit score went down even though you're paying all of your accounts on time. That said, make timely payments on both accounts, keep them open, and you should your score go back up.

Closing an Old Account

Closing an old account can lower your credit score for two reasons. First, it lowers your total account credit limits, which increases your credit utilization, therefore lowering your credit score. Second, it reduces your average account age, which can also lower your credit score. So, if you were wondering why your credit score dropped even though you've been paying on time, this could be an explanation.

Collection Account

If you have any unpaid debt, such as outstanding medical bills or a phone bill, the company you purchased services may have sold your bad debt to a collection agency and the collection agency may have added a collection account to your credit report. Collections accounts can have a devastating impact on your credit score. So, if you notice an unusually large drop in your credit score, it could be do to a collection account being added to your credit report.

One of Your Credit Limits Was Lowered

If a bank or card issuer lowers your credit limit, you could see a drop in your credit score. When a card issuer lowers your limit, this may have increased your credit utilization. An increase in credit utilization, especially above or near 30% will almost always cause your credit score to drop. This is so because the credit reporting bureaus see you as too reliant on credit. The credit reporting bureaus recommend always keeping your credit utilization below 30%. That said, we recommend you keep it lower than that because as you approach 30%, you may begin to see a drop in your credit score.

Bottom Line

If you're making all of your payments on time and nothing negative is showing up on your credit report continue doing what you're doing. Credit scores tend to fluctuate all the time. You may check your credit score in the morning and again in the evening and you might see a small change in your credit score, this is nothing to worry about. However, if you are seeing large swings (30+ points) something else is affecting your credit score and you should take a closer look at your credit report or contact a financial adviser to take a look at what is causing the fluctuation in your score. So, if you're making your payments on time and nothing negative is impacting your credit score, don't worry too much if your credit score drops a little bit as this it's totally normal for your score to fluctuate.

Credit Score Fluctuation From Different Credit Bureaus

Your credit score will likely be different from one credit reporting bureau to another. This is completely normal as each bureau uses a different algorithm to calculate your credit score. Also, the bureaus enter information at different times, so you will likely get a different credit score from each of the bureaus. Personally, I've checked my credit score two days in a row and although nothing had changed on my credit report, I got a different credit score. Credit scores are always changing and although you should periodically check your credit score, you should not worry about small fluctuations as it's normal for them to do so.

Credit Score Planet Frequently Asked Questions

1) Why did my credit score drop after I paid off my car?

Paying off your car, although great for you, may cause your credit score to drop. This is normal and we will explain. The credit reporting bureaus like you to have a good credit mix. Car loans fall under installment loans. So, if the car loan you paid off was the only installment account you had on your credit report, paying it off (effectively closes it) and reduces the great mix which you had, hence lowering your credit score. That said, don't stress too much if your credit score dropped a little bit because you paid off your car, it will bounce back with time.

2) Why is my credit score going down when i pay on time?

As we mentioned above, your credit score may down even if you pay on time for a variety of reasons, such as opening a new account, applying for a new account, closing an old account, and utilizing more of your available credit.

3) How can I raise my credit score?

You can raise your credit score by making timely payments, not applying for new credit cards or loans, paying down your balances, and ensuring that no negative items are added to your credit report.

4) Why did my credit score drop if i didn't miss a payment?

As mentioned previously, your credit score may drop for a variety of reasons despite making your payments on time. We discuss the reasons in much detail above.


How Many Points Will My Credit Score Increase When a Repo is Removed?

If you’re like any of us, you want to maintain the best credit score possible. Whether you want to open a credit card, apply for an auto, or apply for a home loan, your ability to do so depends on having a good credit score. If you bought a car and ended up having your car repossessed, a repossession was probably added to your credit report. Repos can significantly lower your credit score. So, will your credit score increase when a repo is removed from your credit report? We will answer this question in much detail below.

How Many Points Will My Credit Score Increase When a Repo is Removed?

Your credit score will increase by 100 or more points when a repo is removed from your credit report. A repo is a derogatory mark that is added to a person’s credit report when he fails to make payments on a car that he has financed. Regardless of whether a repossession is voluntary or involuntary, it will result in extensive damage to a person’s credit report. Removal of a repo from your credit report will definitely result in a dramatic increase to your credit score. Repos usually remain on your credit report for 7 years. After the 7-year period, a repo should automatically be removed from your credit report.

What is a Repo (Repossession)?

A repossession occurs when a person finances a car through a bank or lender and stops making payments on his car loan. After the payments stop, the lender repossesses (takes back) the car. When a repossession takes place, a derogatory mark known as a repo is added to the person’s credit report. A repo usually causes a lot of damage to a person’s credit score. If you have been unfortunate enough to have your car repossessed, you know how much a repo can affect your credit score. Although there is no set number as to how many points a repo can drop your credit score, many have reported that a repo can lower your credit score by 100 to 150 points. So, it is definitely something that you want to avoid. If you can't avoid it, try hiring a credit repair service to remove the repo from your credit report. Removing a repo from your credit report can increase your credit score by more than 100 points.

Can You Remove a Repo from Your Credit Report?

Although removing a repo from your credit report is extremely difficult, here are some tips that you can follow to remove a repo from your credit report:

  • Negotiate with Your Lender – A repossession is not profitable for your lender. In fact, by the time your lender repossesses your car and sells it an auction, the lender will have lost a ton of money. So, try negotiating with your lender. Ask them if it’s possible to pay off the car or pay a lesser amount to settle the debt. For some lenders, it may be more convenient for them to settle the debt rather than repossessing your vehicle and selling it for less than what you owe. Also, if your lender is willing to negotiate, ask them for a written agreement that spells out the terms of your agreement to avoid troubles down the road.
  • File a Dispute – If you find a repo on your credit report that does not belong to you, try to contact the lender who added the notice to your credit report and ask them to remove it. If the lender refuses to remove it, you can file a dispute through the credit reporting bureau that is displaying the repo on your credit report. For example, if the repo appears on your Experian Credit report, dispute it through Experian. After you file a dispute, the bureau must investigate it and will verify the accuracy of the repo with the lender. If the bureau finds that the repo does not belong to you, it will remove it from your credit report.

How Long Does a Repo Last on Your Credit Report?

A repo remains on your credit report for 7 years. As the repo ages, it will have a lesser impact on your credit score, but until it is removed, it will continue to keep your credit score low. That said, the important date for calculating how long a repo remains on your credit report from the original delinquency date, which is the date on which you first became delinquent on making car payments to the bank or lender. For example, if you stopped making payment on January 10, 2020, your delinquency date is January 10, 2020, meaning the repo will remain on your credit report until January 10, 2027.

If a repo remains on your account after the expiration of the seven-year period, you should contact the lender to remove it or dispute it through the credit report agencies reporting the repo. If you’re able to remove a repo from your credit report, your credit score will increase by 100 to 150 points as long as you have nothing else on your credit report hurting your credit score.

Does a Voluntary Repo Have a Lesser Impact on Your Credit Score Than an Involuntary Repo?

A voluntary repo occurs when a person voluntarily surrenders his vehicle to the lender or bank. An involuntary repo occurs when the lender involuntarily picks up a person’s car and repossesses it. When it comes to the impact on your credit score, a voluntary repo and an involuntary repo have the same impact on your credit score. The damage to your credit score is the same whether you voluntarily surrender your car or it’s taken from you.

How Does the Repo Process Work?

Before a lender repossesses your car, you must be 60, 90, or 120 days late on making payments. Once you're late on your payments, you can either voluntarily surrender your car or it will be taken from you involuntarily. After the car is taken, the lender usually sends it to the auction where it will be sold. Typically, the car is sold for less than what you owe on the vehicle. For example, you may owe $15,000 on the car and the car will be sold for $10,000, leaving you liable for the remaining $5,000.

People often believe that the car being taken from them is the end of a repossession, however, this is not the case. If the car is sold for less than what you owe, the lender will come after you for the remaining amount. In our example, the car sold for $5,000 less than what the person owed on the car. The lender will try to collect the remaining $5,000 from you. If the bank fails to collect the amount, it may sell the debt to a collection agency, and the collection agency will add a collection account to your credit report, further damaging your credit score.

Credit Score Planet Frequently Asked Questions

1) How many points will a repo take off your credit?

A repossession can take 100 to 150 points off your credit.

2) Can a repossession be removed from your credit report?

A repossession can be removed for your credit reporting by either contact the lender and negotiating its removal or by filing a dispute with the credit reporting agency. That said, it is very difficult to have a repo removed from your credit report.

3) Does a car repo affect buying a house?

Yes, a repo is a significant even on your credit report and will affect your ability to buy a house.

4) How bad does a repo hurt your credit?

A repo can hurt your credit score by 100 to 150 points.

5) How long does a repo remain on your credit for?

A repo will remain on your credit report for 7 years. It will then automatically be removed. If a repo is not removed after it expires, you can dispute it to have it removed.


Does Your Credit Score Go Up When a Hard Inquiry is Removed?

If you have applied for a credit card or loan, you may have noticed that a hard inquiry was added to your credit report. A hard inquiry, unlike a soft inquiry, does lower your credit score anywhere from 5 to 10 points. So, does your credit score go up when a hard inquiry is removed from your credit report? We will answer this question in much detail below.

Does Your Credit Score Go Up When a Hard Inquiry is Removed?

Yes, after a hard inquiry is automatically removed from your credit report, your credit score may go up slightly. You should remember that every hard inquiry can knock down your credit score by 5 to 10 points. So, when such an inquiry is removed from your credit report, your credit score may go up a little bit. That said, if you've racked up multiple hard inquiries within a short period of time, you may see a substantial increase in your credit score when all of them are removed from your credit report.

So, what’s the difference between a hard inquiry and a soft inquiry?

Hard Inquiry

A hard inquiry affects your credit score and usually results when a person applies for a credit card, loan, or mortgage account. Hard inquiries involve a bank or lender making a decision as to whether to lend a person money and so they lower your credit score to alert other potential lenders that you’re actively seeking to borrow money.

Hard inquiries stay on your credit report for approximately 2 years. After the two-year period, the hard inquiry drops off your credit report and no longer causes a drop in your credit score. If you apply for too many credit cards or loans within a short period of time, you will see a substantial drop in your credit score. That said, once the hard inquiries drop off your credit report, you will see your credit score go up.

Soft Inquiry

A soft inquiry, on the other hand, results when you check your own credit, a potential employer checks your credit, or a lender wants to preapprove you for an offer. Soft inquiries do not impact your credit score because you’re not actively seeking to borrow money.

How Many Points Does a Hard Inquiry Drop Your Credit Score?

A hard inquiry can drop your credit score by 5 to 10 points. The number of points your credit score will go down depends on how strong of a credit history you have. The stronger your credit history, the less points your score will drop. Also, keep in mind that hard inquiries only remain on your credit report for 2 years. With time, the impact a hard inquiry has on your credit score lessens the older the inquiry becomes.

How to Avoid Too Many Hard Inquiries?

Although a single hard inquiry will not damage your credit score, having too many within a short period of time can. So, how can you avoid racking up too many hard inquiries? You should only apply for as much credit as you need. Also, you should check the requirements for the credit card or loan that you’re applying for before applying. For example, if you want to apply for an American Express Gold Card, you should check the requirements for the card before applying. If you believe you’re a good fit, only then should you apply for the card. This saves you from racking up unnecessary hard inquiries on your credit report.

CSP Pro Tip: Always try to keep your hard inquiries to a minimum. Racking up too many hard inquiries within a short period of time makes you look like you’re credit hungry. This is something that lenders do not like to see. As such, only apply for the credit that you need.

How to Avoid Too Many Hard Inquiries When Shopping for an Auto Loan?

Many our visitors complain that when they visited a dealership to buy a car, the dealership ran their credit through a number of banks. Each bank ended up placing a hard inquiry on their credit report. So, how can you avoid multiple hard inquiries when purchasing a car? To avoid multiple hard inquiries on your credit report, you can should look for a bank that is likely to approve you for an auto loan and apply for an auto loan with them. After you’re approved, you can go to the car dealership with an approved auto loan. This stops the dealership from running your credit through a number of banks looking to finance your car purchase and saves you from adding multiple hard inquiries to your credit report.

How Can You Improve Your Credit Score?

If you have multiple hard inquiries on your credit report that are causing a drop in your credit score, can you still improve your credit score prior to the hard inquiry dropping off your credit report? Yes, there are a variety of things that you can do in the meantime to improve your credit score. Here are some of the things you can do:

  • Make timely payments. Making timely payments on your credit and loan accounts is the best thing you can do to improve your credit score. Payment history accounts for 35% of your credit score, so make sure you don’t miss any payments and that you make them on time.
  • Don’t utilize too much credit. Don’t utilize too much of your available credit. It’s a good rule of thumb to keep your credit utilization below 30%. For example, if you have a $10,000 credit limit, you should keep the balance on your credit cards below $3,000. This ensures that your credit score does not drop due to high credit utilization.
  • Don’t apply for too much credit. You should avoid applying for too many credit cards and loans within a short period of time. This is so because every time you apply, a hard inquiry is added to your credit report. Although a single hard inquiry won’t lower your score by much, too many hard inquiries within a short period of time can cause a significant drop in your credit score.

Credit Score Planet Frequently Asked Questions

1) How many points does a hard inquiry affect credit score?

Each hard inquiry can drop your credit score between 5 and 10 points.

2) How long do hard inquiries affect credit score?

Hard inquiries remain on your credit report for 2 years. After the two-year period, the hard inquiry drops off your credit report and no longer impacts your credit score.

3) When does a hard inquiry show up?

A hard inquiry typically shows up as soon as you apply for a credit card or loan. You can check your credit report a few minutes after applying for credit and you will see the hard inquiry on your credit report.

4) How many hard inquiries are bad?

There is no set number, just try to keep hard inquiries at a minimum.

5) When does a hard inquiry drop off your credit report?

A hard inquiry drops off your credit report within 2 years. Once a hard inquiry drops off your credit report, you will see a small increase in your credit score.


What Credit Score Do You Need to Lease a Car?

If you’re like most Americans, you’re probably financing or leasing your car. To finance or lease a car, you must have a good enough credit score to qualify for a car lease and have your lease application approved. So, what credit score do you need to be able to lease a car? We will answer this question in much detail below.

What Credit Score Do You Need to Lease a Car?

To lease a car, you need a credit score of at least 620. That said, if you have a credit score of 620, there is a high chance that you will either not qualify for a car lease or you will qualify for a lease with bad terms. To lease a car with favorable lease terms, you need a credit score of 680 to 740. If your credit score is 740 or more, you will qualify for the best lease terms. The higher your credit score, the more likely you are to be approved for a car lease and your terms will be better than someone with a lower credit score.

This is so because persons with higher credit scores tend to present a lower risk for lenders because they are more likely to pay on time. Having said that, the requirements to lease a car vary from one dealership to another and from one area to another.

In addition to looking at your credit score, when deciding whether to offer you a car lease, loan officers will consider things, such as: your income and your debt repayment history. When looking at your credit score, some auto dealerships look at auto specific credit scores, which heavily weigh your past repayment of car loans and car leases. So, if you have financed or leased a car in the past and you made all of your payments on time, you should be in good standing to lease a car.

Credit Score Below 680

If you have a credit score below 680, you might face some difficulty leasing a car. If you are lucky enough to obtain a lease, you may end up paying more than you would have paid had you had a credit score above 680. This is so because car dealerships view you as riskier and not as likely to make timely payments on your lease as would a person with a credit score above 680. This is so because the higher your credit score, the less interest you would have to pay. The interest rate on a lease is known as the money factor, the higher the money factor, the more interest you will pay to lease your car. To calculate your interest rate, you should take the money factor and multiply it by 2400. For example, if your money rate is .0024, multiply .0024 x 2400 and this would give you an interest rate of 5.76%.

Credit Score Above 680

If you have a credit score of 680 or above, you will likely qualify for a very good lease deal, probably the same deal that’s advertised on TV. Also, with a credit score of 680 or above, you may be able to lease a car without placing a down payment, but if you put $0 down, you should expect to pay higher monthly payments regardless of your credit score. If you have a credit score of 740 or above, you will qualify for the best lease terms possible because the banks view you as someone who is highly likely to make timely payments on his lease. So, always try to keep your credit score as high as possible so that you’ll qualify for the best available car lease deals.

Does Leasing a Car Raise Your Credit Score?

Leasing a car is similar to financing a car when your credit score is concerned. If you make timely payments on your car lease, this will raise your credit score because making timely payments accounts for 35% of your credit score. However, if you miss a payment, your credit score will drop significantly.

So, treat your car lease as you would treat financing a vehicle: make timely payments. Also, leasing a car can raise your credit score because it creates a credit mix, which is something the credit bureaus state improves your credit score.

CSP PRO Tip: If you’re worried about lowering your credit score by shopping for a car lease, choose a car that you want and check the dealerships criteria for approving car lease applications. This way you can avoid having multiple hard inquiries from being placed on your credit report every time a dealership runs your credit to approve you for a car lease.

What Should You Do to Improve Your Credit Score Before Leasing a Car?

Here are a few things you can do to improve your credit score before heading to an auto dealership to lease a car:

1) Make Timely Payment

If you want to lease a car, the best thing that you can to improve your credit score so that you qualify for favorable terms is to make payments on your loan and credit accounts. This is so because payment history accounts for 35% of your credit score, so making timely payments will dramatically improve your credit score, especially if you have a low starting credit score.

2) Reduce Your Credit Card Balance

Reducing the balances on your credit cards will also help your credit score because having high credit utilization will lower your credit score. So, if you’re using 30% or more of your total available credit, you should lower the balances on your account to improve your credit score before approaching dealerships to lease a new car.

3) Keep Old Accounts Open

If you have an old account, do not close it even though you don’t use it. This is so because your average account age impacts your credit score. The older the average account age for all of your accounts, the better your credit score. So, don’t close any accounts and keep old accounts open as they will raise your credit score.

4) Dispute Any Inaccurate Items on Your Credit Report

You should regularly check your credit score. If you check your credit score and you find inaccuracies on your credit report, you should file a dispute with the credit reporting bureaus or by contacting the bank or creditor on your own. If you find it too difficult to dispute an inaccurate item, you should contact a credit repair agency to dispute the incorrect information on your behalf.

If Your Credit Score is Too Low to Lease a Car, What Should You Do?

If you have a low credit score and don’t qualify for a lease or you qualify for a lease with very bad terms, there are a few things that you can do to qualify for a lease with good terms. The most opted for option is to ask a relative, such as a parent, brother or sister to cosign the auto lease with you. As a cosigner, your relative will be responsible for making the lease payments in the event that you stop making payments. If you stop making payments, you will not only ruin your credit, but you will also ruin the cosigner’s credit.

Make Sure the Lease You’re Entering Into is Right for You

Prior to leasing a car, you should review the terms of your lease agreement work for you. Make sure that you can comfortably make the lease payment on the car. Additionally, you should keep in mind that leasing a car is different from financing a car, it’s more akin to renting a car. So, with a lease, you’re usually limited to driving 10,000 or 12,000 miles per year. Every additional mile you drive beyond the allotted miles, you will need to pay for at the end of your lease. Also, you will be held liable for any damage to the vehicle. For example, if you scratch the front bumper as you’re parking at night, the lessor will probably hold you liable to repair it or pay them for the repair. Just keep these things in mind when you’re deciding whether an auto lease works for you.

Credit Score Planet Frequently Asked Questions

1) Do I need a certain score to lease a car?

You do have to have a fair credit score to lease a car. A fair credit score is one that ranges from 601 to 660. Even having a fair credit score makes it difficult to lease a car. If you want to lease a car with decent terms, you should at least aim to have a good credit score, which ranges from 661 to 780.

2) Can you lease a car with a 580 credit score?

Not many dealerships are willing to lease a new car to someone with a 580-credit score because it’s too low. However, you may find a dealer that’s willing to do so.

3) Does leasing a car hurt your credit score?

Leasing a car may initially hurt your credit score because dealership will run your credit, which places a hard inquiry on your credit report. However, if you lease a car and pay all of your payments on time, you can improve your credit score. However, if you miss payments or don’t make them on time, this could significantly hurt your credit score.

4) Does a car lease show up as debt on your credit report?

Yes, a car lease will show up as debt on your credit report in the form of an installment loan. Usually, the total amount of payments you need to make on the lease will show up as an installment. For example, if you promise to make 30 payments of $200, you will see an installment account on your credit report in the amount of $6,000. As you make your payments, the amount on the installment loan will go down.

5) Can I lease a car with poor/bad credit?

You may be able to find a dealership that is willing to lease you a car with poor credit. That said, it may be challenging to find a dealership willing to lease you a car with bad/poor credit.

Credit Score Needed to Lease a Car

At this point, you probably know that leasing a car with a credit score of 620 or lower is very difficult. In most cases you will not qualify for a lease and if you do qualify, your lease will be very costly. Ideally, to lease a car with decent terms you need a credit score between 680 and 740. For the best terms, you need a credit score above 740. Hopefully this article was able to shed some light as to what credit score do you need to lease a car.


What Does Your Credit Score Start at When You Turn 18?

If you have just turned 18, you may be excited to finance your first car or apply for a credit and so you’re wondering what does your credit score start at when you turn 18? If you have no debt, no credit cards, and no loans, what does your credit score start at when you turn 18? We will answer this question in much detail below.

What Does Your Credit Score Start at When You Turn 18?

When you turn 18, you do not have a credit score because there is no information in your credit report on which to base a credit score. That said, once you turn 18, you’re permitted to open credit cards and take out loans. Once you open a credit card or take out a loan and begin to make payments on them, the banks will report your account status to the three major credit reporting bureaus and you will then have a credit score. The bureaus will then give you a score that ranges from 300 to 850.

Within just a few months of making payments on your credit card or loan, you will have a credit score in the 700s range. So, don’t listen to the myths that your credit score starts at 0 or that your score will start at 300 because they simply aren’t true. Even those who have credit reports that are full of derogatory information will not make it to the 300s range, so rest assured that you’ll have a decent credit score within a few months of making timely payments on your loan or credit card.

When you’re first starting off at 18 years old, you have a clean credit file, so open a credit card and only spend what you can afford to pay off at the end of the month. This will assist you in building the best credit so that when the time comes to buy a card or make a big purchase, you’ll have a great credit score that will qualify you for the best terms. So, spend responsibly and keep your future in mind.

How to Build Your Credit at 18?

The best way to build up your credit when you turn 18 and you’re just starting off is to open a credit card that does not have an annual fee. Once you have a credit card, spend as much on the credit card as you can afford to pay off at the end of each month. This will establish a good payment history, which accounts for 35% of your credit score. Also, keep the account open for as long as possible because this will increase the average age of your accounts, which accounts for 10% of your credit score. Also, when you’re starting off, don’t apply for too many credit cards because each time you apply for a credit card or a loan, the creditor or lender places a hard inquiry on your credit report. A hard inquiry will continue to show up on your credit report for two years from the date it was added. A hard inquiry will cause a small drop in your credit score.

So, choose a card that you’re likely to get approved for and go from there. If you apply for an unsecured card and you’re denied, ask the bank you applied with to open a secured card. A secured card is just as good for your credit as an unsecured credit card.

The only difference is that you will have to pay a deposit and the amount of your deposit determines your credit limit. For example, if you deposit $500 with the bank, the bank will give you a credit card with a $500 limit. After approximately 12 months, the bank may return your deposit and convert your account into an unsecured credit card so long as you make timely monthly payments on the account.

To expedite building your credit, make small charges on your credit card and pay your credit card off at the end of your statement period. This should skyrocket your credit score. Do this consistently month over month and you’ll notice a significant improvement in your credit score even though you’re only 18 and you’re just starting to build your credit. This is so because you’re making use of your credit and you’re paying off in full, this shows lenders that you’re a responsible borrower, borrowing only as much as you can afford to pay off at the end of the month.

That said, we know that not every 18-year-old can pay off the entire amount he or she spends on his credit card, so here is an important piece of information. Using 30% or more of your available credit will lower your credit score. So, always try to keep the balances of your individual accounts below 30%. For example, if you have a $1000 credit limit, do not leave a balance of $300 or more because this means you’re utilizing 30% of your available credit, which can potentially lower your credit score.

While you’re building your credit, it’s a great idea to monitor your credit score. There are a variety of credit monitoring services out there that will allow you to monitor your credit report and credit score. For example, Credit Karma allows people to monitor their credit report and credit scores from Transunion and Equifax, two of the main credit reporting bureaus. So, if you’re looking for a free service, this is a reputable one that’s free for everyone. Monitoring your credit is important to remedy any inaccurate items that may be placed on your credit report. If you find inaccurate information on your credit report, you may be able to remove it by disputing it with the credit reporting bureaus.

Why Should You Build Your Credit Score When You Turn 18?

Building your credit as soon as you turn 18 is a great idea because having good credit and a good credit score is essential in the United States because it qualifies you for the lowest interest rates on credit cards, car loans, and home loans. Also, having good credit is essential for anyone who wants to rent a home or apartment as most landlords look at a renter’s credit history before leasing them an apartment or home, and employers may check your background, including your credit report before hiring you. Building good credit is something that takes time, so getting an early start at the age of 18 is a great thing that will make your life easier in the future. Remember when you turn 18 you do not have a credit score, so you must build it by opening accounts and repaying the debt on time.

Does Your Credit Start When You Turn 18?

We often get asked the question of whether a person gets a credit score as soon as he or she turns 18. The answer is that you could go your entire life without ever having a credit score. This is so because a credit file is created for you once you open a credit card or take out a loan. If you never apply for a credit card and you never borrow any money, you will not have a credit score. The only thing that turning 18 does for you is that it allows you to apply for and open a line of credit. So, if you were sitting around thinking that you’ll build credit by simply turning 18 years old, you’re mistaken. You need to open accounts and repay on time to build good credit.

Credit Score Planet Frequently Asked Questions

1) How can an 18-year-old build credit?

An 18 year old can build credit by opening either a secured or unsecured credit card, using that card responsibly, and paying off the money he or she has borrowed in time. We recommend you pay in full, but the most important part is to at least make the minimum payment on time, so that your account shows up as in good standing on your credit report.

2) What is an 18-year old’s starting credit score?

An 18-year-old has no starting credit score because there is no information in his or her credit file from which to calculate a credit score.

3) What is a good credit score for an 18 year old?

If you’re 18 and you’ve opened a credit card or have a loan, a good credit score is one in 700s range. Open a credit card as soon as your 18, make timely payments on your credit card, and you should have a score within the 700s range in a few months. That said, if you use your credit card and don’t pay on time, you could destroy your credit fairly quickly.

4) What is a good age to start building credit?

We believe that everyone should start building credit as soon as they turn 18. At 18, you can open credit cards and take out loans. So, use credit responsibly and build it as soon as you get a chance to do so because

5) Should an 18-year-old have a credit card?

Yes, every person who is 18 should have at least one no-annual fee credit card. It’s important to build your credit and there is no better way to do so then to start young. Just make sure that you don’t spend more than you can afford to pay off. Debt accumulates quick, and if you can’t pay on time, you will destroy your credit.

Bottom Line

The bottom line is that the credit score you start at when you turn 18 does not exist. You do not have a credit score at 18 because your credit report does not contain any information, and without information, the credit bureaus cannot calculate a credit score for you. You must actively build credit to have a credit score at 18 years old. We have detailed some of the steps that you can take as an 18-year-old to build a good credit score. If you have any general questions or comments, please feel free to leave them in the comments section below.


Why Does Checking Your Credit Score Lower It?

If you’re like most people that live in the United States, you probably want to make sure that you keep your credit score as high as possible because most major purchases, whether you’re buying a home or financing a car, require you to have a good credit score. So, does checking your credit score and credit report lower your credit score? We will discuss this in much detail below.

Why Does Checking Your Credit Score Lower It?

Pulling a copy of your own credit report and checking it will never lower your credit score. Whenever a person checks his or her credit report, a soft inquiry (soft pull) is placed on their credit score. Soft inquiries do not lower your credit score. Only hard inquiries (hard pulls) lower your credit score. Hard inquiries are made when a bank or lender pulls your credit report and score to decide whether to offer you credit or lend you money. As such, checking your own credit report and credit score will never lower your credit score because only a soft inquiry is made.

Let’s discuss hard inquiries in more detail. A hard inquiry is usually placed on a person’s credit report when he applies for a new credit card, auto loan, home loan, or student loan. Hard inquiries remain on a person’s credit report for approximately 2 years.

Hard inquiries can potentially lower a person’s credit score by approximately 5 to 10 points. So, if your credit score matters to you, do not apply for too many loans or credit cards because the inquiries will add up and adding too many inquiries to your credit report within a short period of time can significantly lower your credit score.

Hard Inquiry vs Soft Inquiry

Let’s discuss the difference between hard inquiries and soft inquiries.

What is a Hard Inquiry

A hard inquiry, also known as a hard pull, is an inquiry that is placed on a person’s credit report when he applies for a loan or credit card at a financial institution, such as bank.

For example, if you apply for a credit card, auto loan, home loan, or student loan, a hard inquiry is placed on your credit report. Hard inquiries have the potential to lower your credit score anywhere from 5 to 10 points. Each inquiry will lower your credit score by a few points.

Hard inquiries stay on your credit report for 2 years. After the 2-year period, the inquiry will fall off your report and will no longer impact your credit score. The pitfall that many fall in is applying for too many credit cards or loans within a short period of time. Several hard inquiries can significantly lower your credit score, but one or two inquiries will not have that big of an impact on your score. Lenders and banks don’t like to see too many inquiries on a person’s credit report because it tells them that you’re short on cash and you’re becoming too reliant on credit. So, if you’re thinking about making a large purchase, such as buying a home or financing a car, limit the number of credit applications you make.

Examples of Hard Inquiries

Here are some examples of hard inquiries:

  • Applying for a credit card
  • Applying for a home loan
  • Applying for an auto loan
  • Applying for a student loan
  • Applying for a person or business loan

What is a Soft Inquiry?

A soft inquiry, also known as a soft pull, is an inquiry that is placed in a person’s credit report, but it does not impact the person’s credit score. For example, if you check your own credit, a bank checks your credit to preapprove you for a credit card or loan, or when an employer runs a credit check with your permission, a soft inquiry is usually placed on your credit report. Soft inquiries do not lower your credit score because the inquirer is not checking your credit report to lend you money or approve you for credit. As such, they do not count against you, so check your credit report and your credit score as many times as you want because checking will not lower your credit score.

Examples of Soft Inquiries

Here are some common examples of soft inquiries:

  • Checking your own credit score
  • A bank pre-approving you for a credit card
  • Your employer conducting a background check
  • Your landlord checking your background

What Else Can Lower Your Credit Score?

There are a variety of things other than hard inquiries that can lower your credit score. Here are some of those things:

Not Making Payments on Time

Your payment history accounts for 35% of your credit score, so not making payments on time can significantly lower your credit score. To improve your credit, you should make timely payments on your credit cards and loans.

High Credit Utilization

Utilizing more than 30% of your available credit can lower your credit score. It is agreed in the credit community that keeping your total credit utilization below 30% will help you improve your credit score.

Too Many Hard Inquiries

Although a single hard inquiry typically lowers your credit score by approximately 5 points, racking up too many hard inquiries within a short period of time can significantly lower your credit score. So, space out the amount of time between your credit and loan applications so that your credit report does not accumulate too many hard inquiries.

Short Length of Credit History

A short credit history will lower your credit score. Unfortunately, the only thing you can do to improve this factor is to keep your accounts open for as long as possible. If you have an account that is old, don’t close it down because closing it could reduce your overall account age and lower your credit score.

Check Your Credit for Inaccuracies

Now that you know that checking your credit score does not lower it, you should often check your credit report to know where you stand. If you find any inaccuracies on your credit report, such as a collection account that does not belong to you, you should immediately file a dispute with the credit reporting bureau showing the account. Or, you can contact the collection agency that reported the account to the credit bureaus and ask them to remove it because it does not belong to you. Also, if you find any hard inquiries that you did not make, you should also dispute them to have them removed from your credit report. Once an inaccurate item is removed, you may see a substantial bump in your credit score.

How Often Should You Check Your Credit Score?

A good rule of thumb is to check your credit score once a month. However, if you’ve had your identity stolen or you’re planning to make a big purchase, such as buying a home or financing a car, you should check your score more often to ensure that nothing negative is showing up on your credit report to lower your credit score. Here is more information on how often should you check your credit score. That said, regardless of how often you choose to check your credit score, you should know that you can check your credit score as often as you want without impacting your credit score.

Credit Score Planet Frequently Asked Questions

1) Can I check my own credit score without affecting it?

Yes, checking your own credit report to view your credit score will not affect your credit score, nor will it lower it. This is so because checking your own credit score does not result in a hard inquiry and only hard inquiries will lower your credit score.

2) Is it bad to check your credit on Credit Karma?

No, there is nothing wrong with checking your credit report and score using Credit Karma.

3) How can I check my credit score without penalty?

Checking your own credit score will never result in a penalty. You can check your credit report and score on a daily basis if you want to without having any impact on your credit score.

Does Checking Your Credit Score Lower It?

No. Checking your credit score will not lower it because when you check your credit score, a soft inquiry is placed on your report, and soft inquiries have no impact on your credit score. If you have any general questions or comments, please feel free to leave them in the comments section below.


How Often Should You Check Your Credit Score?

If you’re like any other American, you probably care about your credit score and you want to keep your credit score as high as possible. One of the most commonly asked questions that we get asked a Credit Score Planet is: How often should you check your credit report? We will answer this question below in much detail below.

How Often Should You Check Your Credit Score?

You should check your credit score as often as you feel comfortable checking it. A good rule of thumb is to check your credit score at least once a month. If you’re applying for a credit card, auto loan, or home loan, you may want to check your credit report more often to ensure nothing negative will keep you from qualifying for the credit card or loan you want to apply for.

Checking your credit score does not hurt your credit score, so you can check it on a daily basis without impacting your credit score. This is so because checking your own credit results in a soft inquiry and not a hard inquiry. Hard inquiries hurt your credit score while soft inquiries do not. Now, we aren’t telling you to check your credit score on a daily basis, but checking once a month is a good idea to ensure nothing negative is impacting your credit. That said, regardless of how often you check your credit report and your credit score, checking will never hurt your credit score.

Checking once a month is a good idea. When you check your credit report and credit score, you should not look at small changes in your credit score will always fluctuate. You should only look at big swings in your credit score because those are the meaningful ones. You may check your credit score on Jan 1st and Jan 2nd and your credit score may have fluctuated by 3 or 5 points. This type of fluctuation is insignificant and should not keep you up at night.

That said, you should check your credit score on a daily or weekly basis if you’re planning a large purchase, such as a home or car, to ensure that nothing negative is showing that could keep you from obtaining a loan to complete your purchase. Other than that, checking once a month is a good rule of thumb.

Understanding Your Credit Score

Credit scores range from a low of 300 to a high of 850, the higher your credit score, the better off you are. In the U.S every person is entitled to check his credit score free once every year. There are three main credit reporting agencies that give you three different credit scores. You can check your credit score by using a website that checks your credit score. For example, Credit Karma will allow you to check your Transunion and Equifax Credit Score. You can check your Experian credit score by heading over to Experian’s website and following the instructions provided to you.

Each credit reporting bureau uses the information contained with your credit report to calculate your credit score by applying a mathematical algorithm to the data with your credit report. Each one of the three major credit bureaus will give you a slightly different credit score. Credit scores are very important because lenders and creditors use the information within your credit report to determine whether to lend you money. So, it’s a great idea to periodically check your credit score to ensure nothing negative is impacting your credit score, which will impact your ability to obtain lines of credit and loans.

What is a Good Credit Score?

740 – 850 = Excellent

670 – 739 = Good

580 – 669 = Fair

300 – 579 = Very Poor

How Does Checking Your Credit Score Help You Improve It?

Checking your credit score periodically can help you improve it because pulling your credit report to view your credit score shows you what items are impacting your credit score. Knowing what’s dragging your credit score down give you some insight as to what needs to be done to improve your credit score.

For example, if you pull your credit report to view your credit score, you may find that there is a collections account that does not belong to you on your credit report. If you find such an account, you can either dispute you through the credit reporting bureau or you can call the collections agency and have them remove the account from your credit report. Doing this can improve your credit score significantly.

Also, if you find that you’re utilizing too much of your available credit, you can improve your credit score by paying down some of the balances so that you’re using less of your available credit. You cannot improve your credit score without first pulling your credit report to see what’s impacting your credit score.

You should not worry about small fluctuations in your credit score as your credit score may fluctuate on a daily basis. These small changes are insignificant. You should pay attention to large swings in your credit score as they may indicate an underlying problem. It’s a good idea to check your credit score on a monthly basis to ensure that you’re not a victim of identity theft and that there are no major issues impacting your credit score.

How Do You Check Your Credit Score?

You can check your credit score in a variety of different methods. For example, you can obtain a copy of your credit report, which contains your credit score for free once per year through Annual Credit Report. Also, you can subscribe to obtain monthly and even daily credit reports by using Credit Karma, Experian, Transunion, or Equifax. There are other provides who allow you to check you credit report and your credit score, you can find them by simply google “check my credit report” or “check my credit score” and you’ll find planet of options. Also, more and more banks are now allowing their customers to check their credit score from their online banking portals without having to pay any more. So, check with your bank and see if they provide this service for free before purchasing it from somewhere else.

How Often Can You Check Your Credit Score?

Here is some good news: You can check your credit score and your credit report as often as you feel comfortable checking it without hurting your credit score. This is so because when a person checks his or her credit report, he makes what is known as a soft pull or soft inquiry. Soft inquiries do not impact a person’s credit score. Most services that allow you to check your credit score charge a monthly fee and allow you to pull your credit report and score once a day.

You rarely, if ever, need to check your credit score on a daily basis unless you’re making a large purchase, such as buying a home or a car, nevertheless, you can check your credit score as often as you want. It’s worth noting that your credit score might be different depending on which credit bureau you check you score with even if the information within your credit file is the same.

Different scores result because the algorithms that the bureaus are different, so you might find that you have three slightly different credit scores even though the information within your credit report is the same. That said, as a rule of thumb, it’s a good idea to check your credit score at least once a month, to see whether something negative is dragging your score down.

Credit Score Planet Frequently Asked Questions

Here are some of the most commonly asked questions that we get at Credit Score Planet:

1) How often can you check your credit score for free?

If you use a service, such as Credit Karma, you can check your credit score for free as often as you want. That said, if you simply want to obtain a copy of your credit report that does not contain your credit score, you can check your report for free at Annual Credit Report here.

2) Is it bad to check your credit score?

No, it is not bad to check your credit score and your credit report. You should not check on a daily basis unless you’re making a large purchase, such as buying a home or financing a car. Checking once a month is great to ensure that nothing is hurting your credit score.

3) Is it bad to check your credit on Credit Karma?

No, checking your credit on Credit Karma is not bad. Credit Karma has an excellent website and provides you with a free copy of your credit report, as well as your credit scores from Transunion and Equifax.

4) Can I check my credit score without lowering it?

Yes, checking your credit score will never lower it. So, if you want to check it, feel free to do so as it will not hurt or lower your credit score.

5) What shows up on your credit report?

  • Open credit accounts
  • Open Loans
  • Inquiries from potential lenders
  • Collections accounts
  • Age of open accounts
  • Account Balances
  • Total Debt
  • Credit Utilization

How Often Should You Check Your Credit Score?

At this point, you probably know that you can check your credit score as often as you want without hurting or lowering your credit score. That said, unless you’re a victim of identity theft or you’re making a large purchase, such as a home or car, you should check your credit score once a month just to make sure that nothing is negatively impacting your credit score.


Does Your Credit Score Go Up When a Hard Inquiry Drops Off?

Whenever a person applies for a loan or credit card, the lender requests a copy of his credit report to evaluate whether to lend that person money. This request is known known as a hard inquiry or a hard pull. Every time a bank or lender requests a copy of a person’s credit report to lend that person money, a hard inquiry is placed on that person’s credit report.

Does Your Credit Score Go Up When a Hard Inquiry Drops Off?

Yes, your credit score may improve when a hard inquiry is removed from your credit report. A hard inquiry, commonly known as a hard pull, only remains on a credit report for two years. After the two-year period is up, the hard inquiry is automatically removed from your credit report. Once a hard inquiry drops off, expect your credit score to go up by 5 to 10 points. The point increase will vary from one person to another.

So, if you have applied for a loan, new credit card, or credit line increase, the bank you applied at will place what is known as a hard inquiry on your credit report. There are two types of inquiries that can be placed on your credit report: hard inquiries and soft inquiries. Hard inquiries affect your credit score while soft inquiries do not. Soft inquiries result when a person checks his own credit or a bank or lender checks a person credit to make that person a preapproved offer.

CSP PRO TIP: If you want to avoid having an unnecessary hard inquiry, you should check your lender’s approval requirements prior to applying for a loan or credit card. If you’re confident that you will be approved, go ahead and apply. However, if you believe that you’ll be denied, avoid applying to avoid having an unnecessary hard inquiry from being placed on your credit report.

How Does a Hard Inquiry Affect a Person’s Credit Score?

Whenever a hard inquiry is placed on a person’s credit report, he should expect his credit score to decrease by approximately 5 points. Some may notice a decrease of up to 7 points, while others may experience a decrease of only 3 points. The number of points a person’s credit score drops depends on what other information is contained within the person’s credit report.

If a person applies for several credit cards or loans, each application will result in a hard inquiry being placed on his credit report. Each inquiry will cause a slight drop in the applicant’s credit score. Although a single inquiry won’t create a large impact, if you apply for too many credit cards and loans within a short period of time, you can end up causing significant damage to your credit score. That said, hard inquiries only last for two years from the date you apply and many experts believe that their impact on your credit score begins to lessen within 12 months of you applying for credit.

Also, if a person applies for too many credit cards or loans within a short period of time, this behavior signals financial troubles to potential lenders and banks. Lenders may view you as credit hungry and too reliant on credit, eventually denying you the type of loan or credit you’re applying for.

What Happens to Your Credit Score When an Inquiry Drops Off?

As soon as a hard inquiry drops off of your credit report, you will immediately see a small bump in your credit score. Some experts argue that while it takes two years for a hard inquiry to fall off your credit report, the impact of a hard inquiry only lasts for approximately twelve months.

How Many Points Does Your Credit Score Go Up When a Hard Inquiry Drops Off?

After a hard inquiry drops off your credit report, you can expect your credit score to go up anywhere from 3 to 7 points. The number of points a person will see his credit score going up is different from one person to another, depending on the information within that person’s credit report. Also, if you have multiple hard inquiries on your credit report, you can expect each inquiry that drops off to increase your credit score.

Also, after hard inquiries drop off your credit report, there are other advantages than just a point increase. The less inquiries you have on your credit report, the better it is for you when you apply for new credit. This is so because lenders view those with fewer hard inquiries on their credit report as being less reliant on credit and therefore more credit worthy than someone who is applying for credit left and rights because he is in a financial crunch. So, don’t apply for credit cards and loans that you don’t need because this will result in a hard inquiry being placed on your credit report, which can hurt you when you need to apply for things, such as an auto loan, home loan, or credit card.

How Can You Improved Your Credit Score?

Here are a few tips that you can implement to improve your credit score:

1) Make Timely Payments

Making timely payments on your credit cards and loans accounts for 35% of your credit score. So, making timely payments on your accounts is the best thing that you can do to improve your credit score.

2) Don’t Utilize Too Much Credit

It is agreed upon by most experts that keeping your credit utilization below 30% is recommended to improve your credit score. For example, if you have 2 credit cards with a total credit limit of $10,000, you should aim to keep the combined balances of both your credit cards below $3,000.

3) Don’t Apply for Too Many Credit Cards at the Same Time

Applying for too many credit cards within a short period of time will result in multiple hard inquiries being placed on your credit report. Multiple inquiries within a short period of time can have a significant impact on your credit score as each inquiry could lower your credit score by approximately 10 points. So, accumulating too many of them within a short span can significantly reduce your credit. So, avoid applying for too many accounts at the same time.

4) Pay off your Balances

There is a myth floating around online that leaving a balance on your credit card will help you build your credit. However, this myth is not true. You should try to spend as much on your credit cards as you can afford to pay off completely at the end of the month. Paying off balances will improve your credit score because payment history accounts for a big portion of your credit score.

Credit Score Planet Frequently Asked Questions

1) For how long does a hard inquiry continue to affect your credit score?

Hard inquiries remain on your credit report for 2 years. However, many experts believe that hard inquiries only affect your credit score for 12 months. After the 12 month period, the affect of a hard inquiry begins to lessen.

2) How many points does a hard inquiry drop your credit score?

A hard inquiry can drop your credit score by 5 to 10 points. This number will be different from one person to another, depending on your starting credit score and the information contained within your credit report.

3) How to remove a hard inquiry?

A hard inquiry is automatically removed within 2 years. If you believe that a hard inquiry has been fraudulently added to your credit report, you should either dispute the inquiry or contact a credit repair service to attempt to remove the hard inquiry from your credit report.

4) Does pulling your own credit score hurt your score?

No, pulling your own credit report to view your credit score will not impact your credit score. This is so because when you pull your own credit, a soft inquiry is placed on your account. Soft inquiries do not count against you.

5) How long does it take for a hard inquiry to expire?

It takes 2 years for a hard inquiry to expire. Once it expires, you will see a small bump in your credit score upon its expiration.


How Many Points Does a Tax Lien Decrease Your Credit Score?

What is a Tax Lien?

A tax lien is the government’s claim against a person’s property for failing to pay a tax debt to either the federal or state government. Usually, before the State of Federal Government places a tax lien against a person, they give him a chance to pay the money he owes them. If the person does not pay on time, the IRS or State Tax Authority issues a notice of tax lien that, in the past, appears on your credit report. More recently, tax liens no longer show up on a person’s credit report. So, how many points can a tax lien drop your credit score? We will answer this question in much detail below.

How Many Points Does a Tax Lien Decrease Your Credit Score?

A tax lien will not decrease your credit score by any points because the three National Credit Bureaus (Experian, Equifax, and Transunion) have removed tax liens from credit reports. So, if a tax lien was placed against you, it will not appear on your credit report and will therefore not decrease your credit score. These changes were agreed upon in 2017 and implemented in April of 2018. The removal of tax liens from consumers’ credit reports applies to both state tax liens and federal tax liens.

So, if you’re worried about a tax lien decreasing your credit score, you should no longer worry as they will not appear on your credit report. That said, although a tax lien will no longer appear on your credit report, does not mean that the State or Federal government will not attempt to collect the debt, they may attempt to collect it, but it will not appear on your credit report.

Although you no longer have to worry about a tax lien appearing on your credit report, if you had a past tax lien on your credit report, it should have been removed and you should have seen a significant increase in your credit score.

In the event that you find a tax lien on your credit report that's decreasing your credit score, you should dispute the tax lien with the major credit reporting bureaus so that it can be removed from your credit report and no longer decrease your credit score.

The Impact of Tax Liens on Your Credit Score

In the past, if a tax lien was added to your credit report, it would have caused a significant decrease in your credit score. A tax lien had a severe negative impact on consumers’ credit score, often resulting in a point decrease of up to 100 points. Even if the consumer were to pay to the tax lien, it would still remain on a person’s credit report for approximately seven years, while an unpaid tax lien would remain on a person’s credit report for up to ten years. Luckily, tax liens no longer show up on consumers’ credit reports.

How Can You Removed a Tax Lien from Your Credit Report?

If you have a tax lien that’s being reported on your credit report, you can have it removed by disputing it through the credit reporting bureaus regardless of whether the tax debt has been paid or is still unpaid. That said, keep in mind that disputing your tax lien may remove it from your credit report, the lien will still be in force and so you should contact the IRS or your state’s tax authority to settle the unpaid amount. The second way you can have a tax lien removed from your credit report is to contact the IRS or your State’s Tax authority and ask them to remove the lien from your credit report. If the IRS or tax authority agrees to remove the lien from your credit report, check your credit report after the removal to ensure that the lien has been removed from your credit report.

Removing a Tax Lien from Your Credit Report Does Not Remove Your Duty to Pay

Although you may be successful in removing a tax lien from your credit report so that it does not decrease your credit score, this does not mean that you are not required to pay the outstanding lien. Having a tax lien is especially problematic for those who are seeking to purchase a home. This is so because even though a tax lien will not appear on your credit report, lenders will ask you whether you have any outstanding liens and you will have to answer truthfully.

Also, lenders are able to conduct their own lien and judgment search to uncover any tax liens against you. So, if you’re thinking about purchasing a home, you should settle the tax lien against you with either the IRS or your State’s tax authority. This is so because if a lender uncovers the fact that you have a tax lien against you, they may be unwilling to lend you money to buy a home because a tax lien tells them that you are more likely not to make timely payments on your home loan. So, if you’re thinking about buying a house, take care of your tax lien first.

Credit Score Planet Frequently Asked Questions

1) How do I get a State tax lien removed from my credit report?

You can get a State tax lien removed from your credit report so that it does not impact or decrease your credit score by disputing the lien with the three major credit bureaus. You can file a dispute with each one of the credit bureaus reporting the lien by visiting their website, creating an account, and disputing the tax lien being report against you. As of April 2018, tax liens can no longer be included in your credit report, so if a lien is still showing up on your credit report, open a dispute and have it removed. You can do this on your own or you can contact a credit repair company to have the lien removed for you.

2) Can I buy a house with a tax lien on my credit?

You may be able to buy a house with a tax lien, however, lenders will ask you about the lien and some will be unwilling to lend you the money to buy a house with a tax lien against you, regardless of whether or not it appears on your credit report.

3) How long is a lien good for?

In the past, a tax lien that is paid would appear on your credit report for seven years, while an unpaid tax lien would appear on your credit report for ten years. However, tax liens can no longer show up on your credit report. That said, even if a tax lien does not appear on your credit report, you are still liable to the government for paying off the debt that you owe them.

4) How do you get a lien removed?

You can get a lien removed by filing a disputing with the credit reporting agency reporting the lien on your credit report. Typically, all credit reporting agencies have a process that you can follow to dispute inaccurate items that appear on your credit report. Simply conduct a google search, such as “dispute Experian Tax lien” or “dispute Transunion tax lien” and the results should guide you as to how to file a dispute to have the tax lien against you removed from your credit report.

5) Does a tax lien decrease my credit score?

If a tax lien shows up on your credit report, it will decrease your credit score. However, as of April 2018, tax liens cannot be placed on your credit report, so if there is a tax lien on your credit report, inquire about disputing it and having it removed from your credit report.