Do Delinquent Property Taxes Affect Your Credit?
If you’ve fallen behind on your Texas property taxes, you might be wondering how it could affect your credit, or whether a property tax lien could make it harder to borrow, refinance, or even sell your home. While delinquent property taxes don’t always show up directly on your credit report anymore, they can still have serious ripple effects on your financial profile. Let’s explore what a property tax lien is, how it works in Texas, and what you can do to protect your credit and avoid costly consequences.
What Is a Property Tax Lien and How Does it Work?
A lien is a legal right or claim against assets generally used as collateral to satisfy a debt. In Texas, appraisal districts are required to appraise property values on January 1, and at the same time, a lien is attached to the property. The purpose of the lien is to ensure the property taxes are paid. Property tax liens are created by statute, take priority, and are superior to all other types of liens.
Does A Property Tax Lien Show Up On Your Credit Report in Texas?
Do property liens show up on credit reports? They used to, but in 2018, all tax liens were removed from credit records by the three credit bureaus. This decision was the result of a Consumer Financial Protection Bureau initiative. Previously, tax liens appeared on your credit report for seven years, even if you paid them off. You can get a free credit report from the three reporting agencies annually. If you still have a property tax lien on your credit report, contact the relevant agency to have it removed.
Can You Remove a Tax Lien from Your Credit Report?
Even though property tax liens are no longer part of your credit report, they can still impact your ability to refinance, sell a property, or qualify for new financing. That’s because liens are public records, and lenders or title companies may still view them when assessing your risk profile.
Steps to Clear a Lien
If you’ve recently resolved a property tax debt or are planning to sell your home, you may need to take a few final steps to ensure the lien is fully cleared:
- Pay the outstanding property taxes in full or enter an approved repayment agreement with your tax authority.
- Request a lien release or satisfaction document confirming the debt has been resolved.
- File this documentation with your county clerk’s office and provide copies to lenders or any parties involved in your transaction.
Clearing the lien from the public record can protect your financial reputation and reduce delays in future property or financing activity, even if your credit score itself isn’t directly impacted.
How Unpaid Property Taxes Can Still Hurt You Financially
Everybody wins when property taxes are paid, and everyone loses when property taxes are unpaid. Why? Because they are the largest single funding source for community services. Most of the funds are spent on public schools and educational facilities, and it also supports emergency services such as police departments and fire protection. In what other ways can unpaid property taxes hurt you?
You End Up Paying More
Did you know that from February 1st every year, penalties and interest charges accumulate on your unpaid tax bill in Texas, and you end up paying more than your original bill? Interest is 12.0% per year on your base tax bill outstanding every month until the account is fully paid.
Penalties are 6% on February 1st, 1% on the first of March to June, with a final 2% penalty on July 1st. And from July 1st, an additional up to 20 percent penalty on all monies due for attorney fees accrues to your property tax bill. Ultimately, the collection fees, penalties, and interest on property taxes can be around 48% in the first year alone.
You Could Lose Your Home
How else does a tax lien affect your credit? When a property tax lien turns into a judgment on your residential or commercial property, the taxing authority has the right to foreclose on it. It means you could lose your home in a foreclosure sale, and the funds are used to pay the outstanding property taxes.
You Could Be Sued
Property Tax foreclosure in Texas is via a judicial process. Those attorneys’ fees referenced above pay lawyers to file suit against you, ultimately obtain a judgment, and then foreclose on that judgment. What does all of that mean? You will be served with a lawsuit, along with anyone who has an interest in the property (your HOA, other owners, lenders, and/or other creditors).
You will be ordered to show up to court hearings. Lawyers may abstract the judgment against you, creating a public record of your delinquency and attaching as a claim the obligation you owe the county against any other real property you own or inherit. Your property will be publicly posted for judicial foreclosure sale, and ultimately foreclosed upon.
You Could Have Trouble Qualifying For a Loan
The judgment against you will affect your ability to obtain unrelated financing and negatively affect your credit profile, even if not your score. Due to the property tax lien, you might find it difficult to sell your property or unrelated property you own, refinance your home, or qualify for a loan unless you pay the property taxes and the lien is removed. Although liens don’t show on your credit report, they are public records, and potential creditors will know you have a lien on the property, and your overall credit profile will be negatively affected.
What to Do If You Can’t Pay Your Texas Property Taxes
If you are facing property tax debt and are worried about the tax lien on your property, don’t worry. There are still options available to you. You could make a payment arrangement with your tax authority, or you could apply for a property tax loan..jpg)
Your tax authority will usually be prepared to make an arrangement that will enable you to pay off the debt, but this is not always the most helpful option. You will be tied into a specific repayment period at a relatively high rate. There is seldom any room to negotiate and reach an agreement that is more suitable for you. You have to accept the help they offer you on their terms. A property tax loan is faster and more flexible.
If you’re unsure what to do if you can’t pay your property taxes in Texas, there are solutions available to address your situation. Property tax loans can help you pay delinquent property taxes, avoid foreclosure, and manage penalties and interest effectively.
Choose AFIC for Property Tax Help
If you’re concerned about the financial consequences of unpaid property taxes, from mounting penalties to legal action, American Finance & Investment Co., Inc. can help. We’ve been supporting Texans since 1946 with fast, flexible solutions to cover delinquent property taxes.
AFIC can provide you with an instant quote by completing the form on our homepage. For qualifying properties, we can help you pay off your delinquent taxes and offer you the following benefits:
- Quick and completely online process
- No money down
- No credit check
- Free 30-day rate match
- Match competitors and beat their rate by 1%
- Avoid high penalties and foreclosure
We pride ourselves on finding solutions to suit the unique needs of our clients. If you would like to discuss our property tax loans, please contact our experienced team at AFIC today.
