Does Seeking a Tax Relief Service Hurt Your Credit?
Here’s the honest truth: If you are considering whether or not you need a tax relief service, chances are you either a) Already have bad credit or b) Might be in enough tax debt where your credit score will eventually be affected in the near future. So the real question here is “How can I avoid hurting my credit?” The answer is not so simple.
There are many things that determine a credit score. This is calculated by the FICO score. According to myFICIO, the FICO score calculates your credit by the following:
- Payment history – 35 percent
- Amount of money owed – 30 percent
- How long your credit history is – 15 percent
- How much new credit you have – 10 percent
- Other credit accounts (credit cards and loans) – 10 percent
As you might have already noticed, whether you’ve talked to any tax relief services isn’t factored into this calculation at all. Chances are that FICO specialists wouldn’t even know if you merely had a conversation with a tax expert. While it might seem like they know everything about you and keep a close watch on nearly everything you do, there are actually some fairly strict limits as to what they can and can’t find out about people. That’s not to say that they’ll never know if you contact someone, but they might not really care.
For that matter, if you’ve contacted someone with the hope of getting out from under some other kind of financial debt the credit bureaus might not yet be aware of this fact. Reporting organizations will only take note when payments start to be made by an agency instead of an individual. That being said, they’re far more concerned with something else entirely.
The Bigger Part of the FICO Score: Payments
As you can see, making payments is a big part of your credit score. That means if you default or are late on any payments, it can negatively impact your credit score. So even if you don’t have multiple lines of open credit and you haven’t had it for long period of time, as long as you are faithful on your agreed upon payments—which is usually on a monthly basis, your credit score can still be satisfactory.
This is why if you find yourself in debt, you want to take the precautionary steps to ensure that whatever you owe is being paid, or your credit score will be only one of your concerns!
Making sure that your credit score is high is just as important as making the payments. In order to keep a good credit score, you must take on the responsibility of making your monthly payments before the deadline. Don’t be late, and most importantly, do not miss a payment.
Another Solution: Debt Consolidation
While taking the responsibility of clearing your debt by yourself is smart, hiring the assistance of a tax relief firm is smarter! Taxpayers who find themselves in a significant amount of debt will usually consider debt consolidation. While this may clear some of the smaller debts, it doesn’t directly affect your credit score, because the amount you owe remains the same, if not more because of the interest rate.
People usually focus on programs that help them consolidate their credit card debt, but working to reduce and ultimately eliminate debt owed to Uncle Sam is perhaps more important in many cases because the penalties associated with it are so stiff.
Managing Your Credit Score
Hiring a tax relief firm to manage your debt might reflect on your credit report. It will show that payments are being made by an agency, and according to Credit.com, this will not affect the FICO score, but some lenders may take this into consideration when reviewing your application for a loan. However, not hiring a tax relief firm may result in mismanagement of funds and delinquent accounts that ultimately result in…bad credit.
The benefit of hiring a tax relief service is having confidence in knowing that your debt is being properly managed. This way, you won’t have to worry about defaulting or being late on a payment. While your credit score has more than likely already suffered quite a big hit, there’s no reason that doing some damage control right now can’t help you to get on the right track to rebuilding your credit.
Once you are out of debt, you’ll be in a better position to stay on top of things. Even if you were to only absolve yourself of your tax debt, you’d still be much better off. Imagine that you were underwater on some credit cards and had IRS penalties accruing. By getting rid of the IRS debt, you’d now be able to set aside a little more money each month to address what you owe to lending companies.
Success Tax Relief: Helping You Maintain Good Credit
As payments make up a great deal of your credit score, other aspects of the FICO score must be maintained. Otherwise, the remaining percentage will plummet. Having a good credit score is about balance, and the team at Success Tax Relief can help you achieve that. To learn more about what you can do to avoid, keep, or get a good credit score, call Success Tax Relief today at 877-825-1179.