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How Does a Lien on a Car Affect Your Credit?

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How Does a Lien on a Car Affect Your Credit?

How Does a Lien on a Car Affect Your Credit

A lien placed on your property can cause significant problems when you decide to sell the property, but it can also have a major effect on your credit as well.

Liens can be placed on anything you own, including your home and vehicle. In fact, when you have a vehicle loan, the lender places a lien on the vehicle so that it cannot be sold until that loan is paid in full. Unfortunately, however, creditors are sometimes able to place liens on property without your knowledge and this information is only discovered when you try to trade in or sell your vehicle.

What is a Lien?

The first thing to understand is what a lien actually is. A lien is an assertion of legal interest in property you own. There are different types of liens.

A judgement lien is placed when a creditor wins a lawsuit against a debtor. If you did not pay a mechanic for work done on your car, he can file a lawsuit and place a lien on your vehicle until you pay the debt, although this type of lien is more common when a contractor is not paid for work on a home. Then, the lien is placed on the property where the work was completed.

The Internal Revenue Service as well as state and local governments place tax liens on property for unpaid tax bills.

Liens and Credit

A lien can have a detrimental effect on your credit, although it is difficult to know just exactly how detrimental they may be.

Credit reporting agencies consider your payment history as 35 percent of your score and, because liens would fall under payment history, the reporting agency would view the lien as if you had made several late payments and may rank it as detrimental as bankruptcy.

In addition, having a lien on your vehicle may make you ineligible for a new auto loan as the lien will have to be released in order for you to sell or trade the vehicle.

If you or a loved one has learned that a lien has been placed on your vehicle, contact our office today online or by phone to learn what rights you may have.

Although you may be able to contact the company that placed the lien and request it be removed, the process can be complicated and stressful. Allow our experienced attorneys to deal with the creditor and work to remove the lien so that you can move forward with a clear vehicle title.