How does tax lien information impact the FICO® score?

- Posted by Tom Quinn, FICO® Score Product Manager

Skipping mortgage payments definitely hurts your FICO® score. But what if you don't pay your property taxes?

A tax lien is a matter of public record and the FICO® score includes in its risk assessment any derogatory public records listed on the credit bureau report. One or more tax liens on the credit report can have a significant negative impact to the FICO score.

The exact impact depends on the composition of the individual's overall credit profile and on the details of the tax lien(s). For example, a more recent tax lien could have a greater impact on the score than an older tax lien.

Why do tax liens matter? Simply put, people who don't pay their taxes don't pay their bills.  Recent FICO research has shown that the segment of the U.S. population with a tax lien on their credit reports as of the scoring date had a future bad rate of 43 percent. In other words, 43 percent of the people with tax liens became at least 90 days past due on any one credit obligation within the next 12 months. That's twice the average for the whole population.