How UCC Liens can Hurt Your Credit Score

By Robert Jacovetti

Obtaining capital to grow your business is a top priority for entrepreneurs. You may notice something new on your credit reports when you get a loan: a UCC filing. Our New York debt relief attorneys will discuss how UCC liens may affect your credit score and ability to get business financing.

What Is a UCC Filing?

A UCC filing, also known as a UCC-1 statement, is a document that notifies other lenders that a business has used certain assets to secure a small-business loan. If you spot one on your credit report, it is recommended to seek the help of a lawyer experienced with UCC liens to determine your best legal options.

How Does a UCC Filing Affect My Credit?

UCC liens filed against your assets within the last five years will appear on your business credit report, which could affect your ability to borrow money from other lenders. The lender who files the claim, for example, will get first dibs on your assets. The future lender who discovers a UCC-1 filing in your credit report may be unwilling to give you a loan because you would be considered a risk. Your business would only be able to recover its losses if it went bankrupt after the first lender’s claims were satisfied.

How Do I Remove a UCC Lien?

Upon paying off your business loan, your lender should release your business from any claims on its assets. If they wish to terminate a UCC, they can do so by filing a termination statement with your state’s secretary. Due to this time lag, outdated UCC filings may appear in your business credit history. After you’ve made your final loan payment, it’s a good idea to ask the lender in writing to cancel the lien.

It is also essential to monitor your business credit history to ensure no UCC filings are listed in error. Just like a lender would do when vetting your loan application, you can visit the secretary of state’s website and conduct a search for your own business’s UCC-1 filings. If you find a lien that shouldn’t be there, you can ask the lender to file the paperwork to remove it.

As you can see, dealing with UCC liens can be time-consuming and frustrating. It is highly recommended to seek the help of an attorney to assist you through the process. A lawyer experienced in handling UCC liens will be able to assess your particular situation and provide you with the best and most efficient course of action.

Jacovetti Law, P.C. Can Help You Today!

If you’re struggling with a UCC lien, our knowledgeable and experienced team can help you develop a plan to get your credit score back where it should be. We have helped countless businesses in New York get back on track, and we can do the same for you.

Contact our New York debt relief attorneys today by calling (516) 217-4488 to schedule a consultation!