Small business lending and the utilization of tax lien data

A credit agent must decide to lend based on many different data points. What is one of the biggest problems in the world of credit decision making? Not the least of which is tax lien data. However, there is good reason to believe that tax lien data may not be as reliable as traditionally assumed in credit decisions.

One of the problems is that the major credit bureaus are not reporting tax lien data anymore. Couple this with the issue that public records of tax lien data are not accurate then you have a real issue with visibility to a company’s ability to pay their tax liens.

Without visibility on tax lien data you don’t know if they are paying their taxes or making payments on their tax liens. Sometimes a business may have a tax lien but, because you don’t have the ability to see it in public records, you may not know they have one. This is because the IRS doesn’t keep up with its reporting the way it most likely should with regards to tax liens. So, in public records, if they have a tax lien recorded how do you know if the amounts listed on it have grown or been paid off? There is no way to know for sure via the public record.

When a lien is listed on public records it shows only the information that was accurate as of the day it was listed. It may have been paid off. Or, it could have grown exponentially due to non-payment and added fees and penalties. The only way to overcome this problem is to figure out how to get the information directly from the IRS itself.

To recap, credit bureaus are not reporting tax lien information any longer. The IRS is not consistent with reporting tax liens on public records. Also, tax lien information is outdated almost as soon as it is put on the public record. Learning to deal directly with the IRS is the best way to overcome these obstacles.

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