Ronnica Rothe is a graduate with honors from the University of Oklahoma and a current student at Southeastern Baptist Theological Seminary. She works with Vison Credit Education to help individuals get out of debt and reach their financial goals.
A lien is a legal claim over property that must be paid before selling the property the lien is on. Understanding liens is important when you make get a car loan, a mortgage, or do not pay your taxes or mechanic’s bills.
Consensual liens are not a problem for you or your credit rating in most cases. This is what happens when you take out a loan when purchasing a car or house. It is like the car or house is used as collateral for the loan. If you do not pay the loan, the company with the lien on your property has the right to take your property from you in order to recover the money you owe them. This type of lien only becomes a problem if you stop paying your bills, as you will then lose the car or house that you might need to live.
There are also involuntary liens which are a problem. An involuntary lien means that someone has placed a claim on your property because you owe them a significant amount of money. One kind of involuntary lien is a tax lien. Once you have a tax lien, it is on your public record permanently. This can occur when you do not pay your property or income taxes, and can be put on your property by local, state, or federal government. If you have a federal tax lien, it will stay on your credit report for 15 years, significantly damaging your credit score.
Another type of involuntary lien is a mechanic’s lien or construction lien. This type of lien occurs when you do not pay for your car repair or construction property bills. In the most extreme cases, the mechanic or contractor could take away your property in order to recover their losses. The best way to avoid this type of lien is to pay your bills.
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