How Does Tax Refund Help Boosting Credit Score?

Tax refund to boost credit score

How Does Tax Refund Help Boosting Credit Score?

According to the data received from the 2020 IRS report, the average tax refund amount for the average American taxpayer is around $3125. Typically, people plan their vacations when they receive the tax refunds. On the other hand, some people prefer buying gadgets or home appliances when they receive a tax refund. However, making meticulous use of the tax refund can boost your credit score significantly. So, here are some tips to improve your credit score through a refund that you have received from the IRS.

1. Pay Your Credit Card Bills

You can use the money received as a refund to pay your credit card bills. Paying the bills timely is essential to improve your credit score drastically. Therefore, you should not miss this opportunity to pay your credit card bills conveniently. At times, you may have some overdue credit card bills, which may require to be converted into monthly EMIs.

Converting the bills into monthly installments is a good way of paying the bills, though it will reduce your credit score temporarily. Instead of letting the credit rating go down, you should use the tax refund to pay the bills on time. Similarly, you can pay off your debts using a tax refund instead of investing it into luxurious expenses.

2. Foreclose Your Loans

The tax refund can be used to foreclose the loans, and the foreclosure will help boost your credit score quickly. People desiring to obtain an impressive credit score should consider foreclosing their loans. Foreclosure could be a difficult thing for salaried persons since their monthly incomes are limited. When you get a good tax refund, you can use the amount to foreclose the loans to elevate the credit score. The most aggressive credit repair company will recommend this measure to you.

3. Create an Emergency Fund

You can use the tax refund amount to create an emergency fund to pay your debt. Emergencies come into our lives without notice. When there is a medical or financial emergency, you may face a short-term financial crunch. While you may have savings to deal with the household chores, you will face difficulty in paying your credit card bills.

Creating an emergency fund is essential for this reason. During a financial crunch, you will not face difficulty in paying the credit card bills since you have saved the funds for such unforeseen events in the past.

4. Invest Your Tax Refund in Stocks

Investing in the stocks may not directly impact your credit score, but it will diversify your financial portfolio. Investing in stocks can help you gain wealth, which can be used later to apply for a secured loan. Applying for a secured loan instead of an unsecured debt will not affect your credit score. You will obtain a handsome loan amount without disrupting your credit score.


So, these are a few things that you can follow to build a handsome credit record through the meticulous use of your tax refund. So, make sure you make good use of the tax refund next time. Instead of making luxurious expenses, invest the tax refund for a better purpose to build a robust creditworthiness in the future.


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