Creditors that allow purchases to be made through financing often require property to be pledged against a credit account. This property is known as collateral. Through the use of collateral, creditors establish a priority interest in the asset used to back the loan or line of credit (LOC). If you default on your repayment obligation, the creditor can place a lien on your property. Liens come in a number of forms under three broad categories: consensual, statutory, and judgment liens. Consensual liens won't impact your credit score, but the same cannot be said for judgement a🌸nd most statutory liens.

Types of Liens

Will a lien show up on your 澳洲幸运5官方开奖结果体彩网:credit report? The answer to this question depends on what type of lien you're dealing with. Essentially, consensual liens don't adversely affect your credit as long as 澳洲幸运5官方开奖结果体彩网:repayment terms are satisfied. Judgment and most statutory liens have a negative impact on your 澳洲幸运5官方开奖结果体彩网:credit score and report, wh🐻ich affe🉐ct your ability to obtain financing in the future.

Consensual Liens

Consensual liens are those you consent to voluntarily, such as taking out a loan or line of credit (LOC). Residential mortgages and vehicle loans fall under the category of consensual liens. So long as you make payments in line with the 澳洲幸运5官方开奖结果体彩网:credit agreement, you retain ownership and control over your property. Consensual liens are visible on your credit report, but they don't have a negative impact unless the 澳洲幸运5官方开奖结果体彩网:collateral is seized by the creditor due to nonpayment.

Statutory Liens

Mechanic's liens fall under the category of statutory liens (i.e., those that stem from statutes instead of the common law or contractual provisions). A mechanic's lien is placed when a contractor or mechanic isn't paid for work performed, and it represents a financial interest in the home, vehicle, or business on which the work took place.

澳洲幸运5官方开奖结果体彩网:Tax liens are another type of statutory lien, which are placed by the government when income, estate, or property taxes owed aren't paid. As of 2018, the 澳洲幸运5官方开奖结果体彩网:three major credit bureaus no longer list tax liens as 澳洲幸运5官方开奖结果体彩网:derogatory remarks on your credit report. All other statutory liens can be detrimenta𓂃l to yourܫ credit, as they remain listed for seven years.

Judgment Liens

The most severe type of lien, 澳洲幸运5官方开奖结果体彩网:judgment liens are the result of a court granting a financial interest in your property to a creditor. Judgment liens are common when personal or business property is used to satisfy damages incurred that aren't wholly covered by 澳洲幸运5官方开奖结果体彩网:insurance, such as a car accident or liability claim. Judgment liens also remain on your credit rep𝔉ort for up to sev𒉰en years.

The Bottom Line

Liens won't automatically hurt your credit. Consensual liens are harmless, so long as they're repaid. Others, such as mechanic's or judgement liens, can negatively impact your financial situation. Aim to keep all of your liens consensual to keep your credit score and report in good standing.