A different use of your tax refund: Help your credit score
freecreditscore.com™ shares four easy ways to get some ROR — “return on refund”
Costa Mesa, Calif., Mar. 27, 2013 — The Internal Revenue Service estimates that nearly three-fourths of tax filers will receive a tax refund this year1. Many people take this opportunity to make a big purchase, but they might want to consider making a big impact — on their credit scores. freecreditscore.com™ suggests four tax refund tactics people can take to improve their financial situation.
“People don’t usually make a connection between tax returns and managing credit,” said Ken Chaplin, senior vice president of marketing for freecreditscore.com. “‘Extra’ money, like a tax refund check, provides a great opportunity to look at one’s credit status and see where some improvements could be made.”
Here are a few guidelines for consumers to consider when determining how to allocate funds from their tax refund:
• Pay down debts — Approximately 30 percent of an individual’s credit score is based on how much credit is being used, in relation to how much credit is available. Those who struggle with high credit card balances should consider applying their tax refunds toward making a big debt payment. Focus on high-interest debts first before moving on to tax-deductible debts such as mortgages and student loans.
• Prepare for a rainy day — Unforeseen challenges and emergencies can quickly derail long-term financial plans or can wreak havoc on credit scores. An “emergency fund” can hedge against these unfortunate events, which can spiral into financial strain and even negatively impact your credit score.
• Catch up on unpaid bills — Approximately 30 percent to 35 percent of a credit score is determined by whether or not bills are paid on time. Using a tax refund to help reduce or pay off debt can positively impact a consumer’s credit score, while also helping to alleviate the stress from paying interest each month.
• Splurge in moderation — Rewards are nice, and a tax refund seems like the perfect time for a little self-indulgence. However, when strategizing about the best ways to allocate a tax refund, be sure to check off responsibilities first. Remember, this is money that very well might have been used to pay off a credit card or a loan, anyway, if the money had not been taken out for taxes.
Understanding and monitoring credit are widely recognized as important steps to establishing a solid personal finance profile. Maintaining a high credit score benefits that financial profile. Credit education, tools and resources — including the patented Score Planner™ — are available for free to both members and nonmembers at freecreditscore.com.
Additional information about credit and credit scores is available at http://www.freecreditscore.com.
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freecreditscore.com is part of a family of online consumer credit reporting sites belonging to ConsumerInfo.com, Inc., an Experian company. ConsumerInfo.com, Inc. was founded in 1995 to give consumers quick, easy and inexpensive access to their credit profile. It is now the leading provider of online consumer credit reports, credit scores, credit monitoring and other credit-related information. ConsumerInfo.com, Inc. provides credit monitoring to its more than 3.1 million members and has delivered more than 20 million credit reports on the Web. As part of the Experian family, it continues to grow its membership base and develop innovative products to help consumers better understand and manage their credit.
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