Don’t Let Your Taxes Damage Your Credit Scores

FreeScoreTax season is here. And the deadline to file is quickly approaching. Are you the type of filer that eagerly gets in their return, excitedly anticipating a fat refund? Or are you the type that waits until the last day, fearing what you might owe? If you’re one of those that hasn’t yet filed your return, then you might be starting to get a little nervous with the April 15 deadline only a couple of weeks ago, but delaying the inevitable only puts you at risk of unpaid taxes that could negatively impact your credit scores.
In “Avoid Exposing Your Credit Scores to a Taxing Situation,” the experts at FreeScore relay some information about why you should go ahead and face this unpleasant task, so that you can avoid a situation that could potentially drag down your credit scores.
When you file your return, if you owe a balance, you will receive a bill from the IRS. This bill will include the amount you owe, as well as any penalties and interest that has accrued. To avoid any fees, the IRS recommends paying the amount in full with 120 days. However, if that isn’t possible, and you owe less than $50,000, the IRS will help you set up an installment agreement to pay off your bill over time.
If you do not set up an installment agreement, then the IRS may file a Federal Tax Lien, which notifies the public of your unpaid tax debts. This notification, a public record, will be reported to all three credit agencies: TransUnion, Experian and Equifax. This could have a negative impact on your credit score. To worsen the situation, the IRS doesn’t periodically update the balance on the lien, so it will be even harder to remove from your credit report.
For those of you getting a refund, use the money wisely. Spending it on new clothes or a flat screen TV may be tempting, but use the money instead to pay off bills that if paid late or left unpaid could negatively impact your credit score.
Just as important as filing your taxes on time is staying on top of your credit, which you can do with FreeScore. FreeScore gives you easy access to your credit scores and reports from all three major credit bureaus, and makes it easy for you to check your complete credit profile every month to make sure there are no discrepancies. Plus, you have the benefit of 24/7 credit monitoring and automatic alerts, so that you can always stay on top of your credit reports and avoid unwelcome surprises.