Having Unpaid Taxes Affect Credit Score
There are a lot of people nowadays who neglect their tax because they think that missing out on
it is no big deal. Unpaid taxes are like your regular credit bills; you have to pay for them
regularly all the time and if you don’t you will end up with a poor credit history and a very low
credit rating. And as we all know, a very low credit score will do no one any good.
If you happen to be one of these people, then here are some things about unpaid taxes that you
should know about.
Are you planning to arrange a payment plan with your internal revenue service? Then
worry no more about hurting your credit score. If you are planning to do this to pay back
your taxes, you don’t have to worry about it getting reported back to the credit agencies.
In fact, it is against the law for agents to share their tax payer’s information to someone
else. Your credit score will be affected but only if you got a tax lien from the IRS if you
failed to pay for your tax. Liens will grant the government a legal claim to a tax payer’s
assets that is equal amount of the unpaid tax.
The liens are generated by the public court, and not by the IRS who keeps on reporting
you to the credit agencies (Experian, Equifax, Transunion). Still, the 3 credit agencies
will see these records and it can be very hard to remove it from your creditreport.
Liens can have a huge impact in your credit score and it can even lose up to 100 points
or more, and it may even depend on the score they have upon receiving the lien. What’s
ironic is that, the higher the score is, the lower it will become. A hundred points could
have taken months or even years to earn, so it is best to pay your taxes all the time to
avoid hurting your credit.
The IRS have made a few adjustments to their threshold and have increased it, wherein
in liens can be instituted from 5, 000 – 10, 000 dollars in taxes.
It is important that you know a lot about taxes and its importance. Missing your taxes will only
bring harm and paying for it does bring good, literally. Paying for your taxes regularly will not
only improve your credit score, but you will get your tax return at the end of the year. The
amount will of course depend on how much excess you paid, but still, it is your had earned cash
coming back to you.
Always remember to keep your credit in good shape to avoid financial issues in the future. Just
check your credit report regularly to make sure that it is free of errors and that all of the items in
it are correct.
You are entitled to get your free credit report annually and keep a track on your credit history.
Check credit report and credit score regularly throughout the year to keep your score high.