topic IRS installment loan affect credit score in Rebuilding Your Credit

IRS installment loan affect credit score

Anonymous — Thu, 07 Jul 2011 22:34:59 GMT

Hello everyone. I have a question about the IRS installment loans, I owe roughly 3500 in back taxes. I called them today and they told me that I could set up an installment loan with them. I've recently been working on fixing me credit and have had a few negatives removed. I'm wondering if this is going to report to the CA and hurt my fico score. Would it be better to not do the installment loan or do it? Any help please. Thanks alot.

Re: IRS installment loan affect credit score

sassymomof2 — Thu, 07 Jul 2011 22:58:29 GMT

Nope! Its an installment agreement not a loan (although you technically have been using the government's money that's why you pay back with interest). The only way it would affect your credit is if you fool around and default on your agreement. Then you open yourself to levies and possibly a federal tax lien. Good luck & remember any future refunds you may have coming your way will most likely be applied to your deficiency until it is paid.

Re: IRS installment loan affect credit score

IOBA — Fri, 08 Jul 2011 23:41:54 GMT

Agreed. My friend owes the IRS a lot of money and is on a payment plan. It does not show up on his credit report.

Re: IRS installment loan affect credit score

Anonymous — Sat, 09 Jul 2011 14:32:36 GMT

Thanks alot for the useful info. I've worked really hard the past three months and don't want anything screwing it up now. What about this. I have/had a collection on my experian, TU and EQ credit report. I disputed with all three and they removed it off all of them but EQ. Any reason why?

Re: IRS installment loan affect credit score

Anonymous — Thu, 29 Mar 2012 17:03:15 GMT

From previous experience my installment agreement never showed up on my credit report. I don't know what happens if you default. I do know that liens and judgments will show up in public records and credit reports. Hope this was helpful to you.

Re: IRS installment loan affect credit score

pizzadude — Thu, 29 Mar 2012 17:29:01 GMT

Assuming that you pay on time according to the installment plan then it won't show on your credit reports. If you miss payments or stop paying altogether then I would expect it to show up as a derogatory item.

Re: IRS installment loan affect credit score

Anonymous — Sat, 31 Mar 2012 15:05:27 GMT

I've had payment plans w/ the IRS and local property tax folks - never showed up on CR's. Also noticed utility & medical bills as well as bills from small companies don't show up either. If you get turned over to collection or a levy/lien is filed then you can reasonably expect a major ding to your credit.

If you get in a bind, the most important thing is to communicate to your creditor and try to work something out - you can frequently get some relief for month(s) if you can propose a realistic plan.

Credit Cards, mortgage, car notes and large companies will ding you on first missed payment, at least make minimum payment due to them, see if you can work something out with the others (IRS, prop tax, utilities).

Re: IRS installment loan affect credit score

MarcinXP — Sat, 31 Mar 2012 17:01:07 GMT

I owe IRS about $10,000....yes sadly I made some bad decisions in the past...On the installment loan now...in-fact In the past 3 years I defaulted on the installment loan 3 times...I ingnored the letters and even some of the letters.....but I've never ignored FINAL NOTICE OF INTENT TO LEVY...and then started another installment loan...got more wiser in the last 12 months since being here...and paying on time now...got maybe another 2 years...but no..nothing from the IRS on my credit...only thing on my credit is State Tax Lien which has been paid and released on 2/1/2008 which means it will be removed on 2/1/2015...3 more years...sheesh...oh well...got to pay for my mistakes...thank god that all it takes is rebuilding by paying on time and well "Time"....2015 will be my year I should be around 750!!! all of my baddies will be gone by then and all my current accounts will be almost 4 years old...I will never mess my credit again as long as I can help it

Re: IRS installment loan affect credit score

Pode — Wed, 04 Apr 2012 17:42:27 GMT

This is an agreement with the IRS and should in fact be taken very very seriously; never ever miss a payment with them. Pay it off as soon as possible. It is a dual edge sword. The interest that you will be paying is totally predatory and is designed for you to double and even triple pay. They can do this because they are a governmental agency and case in point will violate law as a mean to an end. No one will ever admit to this but it is what it is.

Secondly and most importantly The agreement in and of itself will not negatively impact your score, however please note by getting into an agreement with them they will file against you a Tax Lien in spite of the agreement, and it is this that will negatively impact your score, and severely I might add.

Pay it off immediately and then demand the removal of the Lien. The problem with this is, the IRS will then file a release of Tax Lien, which in and of itself negatively impacts your score in much the same manner as if you still had the actual lien itself on you. This is the unfair part of it.

Because even though you have satisfied the requirement and paid the lien or let’s just say the lien itself is 8-10 years old and under law and the SOL (Statue of Limitations) you force the IRS to remove the lien, they then will file a release of Tax Lien which will remain on your credit report for 7-10 years, and as such it will have the same impact as the actual Tax Lien itself.

The Release of Tax Lien will remain on your credit profile for exactly 7-10 years it will negatively impact your score for 7-10 years although the actual lien is satisfied and removed the Release of Tax Lien will stay in force, and it will diminish your Fico Score. Impact probably -25 to -55 points with the release of Tax Lien. The same is applicable to California FTB.

My experience I have challlenged them in court and won. I am very familiar with IRS TC, and state of California RTC.

IRS installment loan affect credit score

Anonymous — Thu, 05 Apr 2012 14:50:16 GMT

Pode, are you saying that any loan a person has with the IRS to repay taxes owed automatically has a tax lien placed against that person? Or only if you defaulted?

Re: IRS installment loan affect credit score

MarcinXP — Thu, 05 Apr 2012 16:37:49 GMT

I have to disagree and the experience I've had was nothing short of wonderful...They worked with me even when I defaulted many times and never got IRS TAX LIEN..although I defaulted and ignored their letters...I've never ignored FINAL NOTICE OF INTENT TO LEVY letter that they send certified..that just seemed to scary...Tax Lien, Levy wages, bank account...etc...

I defaulted few times and they always worked with me even when I thought they would not...I had a $500 installment..defaulted...they helped me out and set me up for $225 a month...had few job issues and now I'm on $150 a month for 12 months and $240 after that...I also disagree with saying that they have crazy interest rates or anything like that...their interest rate is WAY better than any loan or credit card I have seen...just to give you a detailed history

I owed $6,400+ for 2007 and $7,000 for 2008. I have paid $914.92 in interest in last 5 years for 2007 amount and $748.35 for 2008 amount...I'm almost done with the 2007 pay off and I haven't touched 2008 yet...with my refund going directly to 2007 amount owed..I should be done with 2007 installment in few months and I can start paying back 2008 installment...just to give you a perspective on the interest.

February Statement shows Year 2008 Taxes you owe $7,006.18 Interest Charges $748.08

March Statement shows Year 2008 Taxes you owe $7,006.18 Interest Charges $768.08

So they roughly charge me about $20 a month in interest. The only reason that taxes amount has not changes is because I still owe about $1200 from 2007 taxes so once I pay that I will start paying 2008 year..which makes sense...

BUT....in last 4 years the interest is about 10% total of amount tax I owe...in fact $20 a month in interest charges on a $7,000 amount I owe is about 2% APR which is lower than any credit card company or bank I know. On the amount of $13,000 that I owed in last 4-5 years so far I paid $1650 in Interest...over 4 years or about 400 a year...that is I think really great...that is about $30 bucks a month which if you have a credit card at 12% APR you would pay that $30 on the amount of $3,000.

I believe IRS can only charge UP TO 25% in interest on a total anyway as is stated on the installment agreement..so If I owe $7,006.18 the max they can charge in interest is around $1750...but as you can see in the last 4 years they charged me only $768.08...with the fact that I will start paying on this end of this year and also that I've changed my withholdings and get about $2,500 in refund a year in last 2 years I should be done with this in less than 24+ months which means that my interest will probably be less than a $1000 anyway so thats about $240 more dollars over next 2 years..

YMMV but to me IRS has been great..it's my fault in the first place for going exempt for work bonuses thinking that I can just pay later and being irresponsible...I've learned my lesson and won't be doing this again...in-fact anytime I get a bonus now I leave my witholdings at 0 and let them take max just so I can get a decent refund and put it towards my taxes....I'm looking forward to the day that I finish this.

Pode - seems like you had a different experience so sorry it did now work out for you