{"id":38956,"date":"2024-04-23T14:44:12","date_gmt":"2024-04-23T19:44:12","guid":{"rendered":"https:\/\/www.eztaxreturn.com\/blog\/?p=38956"},"modified":"2024-05-08T09:40:27","modified_gmt":"2024-05-08T14:40:27","slug":"do-taxes-affect-my-credit-score","status":"publish","type":"post","link":"https:\/\/staging.eztaxreturn.com\/blog\/do-taxes-affect-my-credit-score\/","title":{"rendered":"Do Taxes Affect My Credit Score?"},"content":{"rendered":"\n

The information in this article is up to date for tax year 2023 (returns filed in 2024).<\/em><\/p>\n\n\n\n

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Taxes are a big financial responsibility. So you may be wondering if and how taxes affect your credit score. <\/p>\n\n\n\n

If you fail to pay your taxes, the IRS could file a \u200b\u200bNotice of Federal Tax Lien against you. Before 2018, a tax lien would be reported on your credit and could impact your credit score. <\/p>\n\n\n\n

Today, that is no longer the case. However, there are still indirect ways that taxes\u2014and failing to pay them in a timely manner\u2014could impact your credit score. <\/p>\n\n\n\n

Here\u2019s what you need to know.  <\/p>\n\n\n\n

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Do taxes affect your credit score?<\/strong><\/h2>\n\n\n\n

In short: no. Paying or not paying your taxes will not directly affect your credit score<\/a>. However, there are ways paying taxes (or not paying taxes) can impact your credit indirectly.<\/p>\n\n\n\n

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Does the IRS report to credit bureaus?<\/strong><\/h2>\n\n\n\n

The IRS does not report tax debt to credit bureaus. Under the Taxpayer Bill of Rights<\/a>, taxpayers have a right to privacy and confidentiality\u2014meaning that the IRS will not disclose your tax information to third parties. <\/p>\n\n\n\n

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What happens if you don\u2019t pay taxes or pay late?<\/strong><\/h2>\n\n\n\n
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Late penalties and interest<\/strong><\/h3>\n\n\n\n

If you don\u2019t pay your taxes on time, you may incur late penalties and interest on your tax bill<\/a>. This on its own won\u2019t affect your credit score. <\/p>\n\n\n\n

However, if you are having trouble making tax payments, and use credit to cover your debt, this could put you in a tough financial situation. <\/p>\n\n\n\n

For instance, if you overstretch your budget and miss payments on other debts in order to cover your taxes, those defaults could end up on your credit report. Additionally, if you open a new credit card to pay your taxes, that could <\/p>\n\n\n\n

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  1. result in a hard inquiry on your credit, leading to a temporary hit to your credit score. <\/li>\n\n\n\n
  2. increase your credit utilization ratio (your outstanding credit balance compared to your credit limit). Credit utilization is a key factor in determining credit scores, and a high utilization ratio can quickly reduce your credit score.<\/li>\n<\/ol>\n\n\n\n
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    Get Started Now<\/a><\/div>\n<\/div>\n\n\n\n
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    Tax liens<\/strong><\/h3>\n\n\n\n

    If you fail to pay taxes at all, the IRS may file a tax lien against you. <\/p>\n\n\n\n

    A tax lien<\/strong> is the government\u2019s legal claim against your property when you neglect or fail to pay a tax debt. A lien attaches to your assets, including personal and business property, vehicles, securities, and any future assets you acquire under the duration of the lien. <\/p>\n\n\n\n

    While tax liens are no longer directly reported to credit bureaus as of 2018, they are public record. This means lenders and credit officers can find your tax lien record, which could impact your ability to get loans or new credit cards, and even potentially affect your ability to rent if your landlord checks the public record.<\/p>\n\n\n\n

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    Do IRS installment payments affect your credit?<\/strong><\/h2>\n\n\n\n

    No, IRS installment payments will not affect your credit. <\/p>\n\n\n\n

    If you think you will have trouble paying your taxes on time, you can apply for a payment plan<\/a> to pay in installments for an extended timeframe. Late payment and payment plans are not reported to your credit. Plus, if you request an IRS payment plan, the IRS is generally prohibited from levying or filing a tax lien<\/a>, meaning your payment plan status will never be shared on your credit report. <\/p>\n\n\n\n

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    How to keep taxes from affecting your credit score<\/strong><\/h2>\n\n\n\n

    Your taxes won\u2019t affect your credit score directly. But to ensure your tax situation doesn\u2019t impact your credit indirectly, be sure to <\/p>\n\n\n\n