Smart Ways to Make the Most of Your Tax Refund

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Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

, Content Manager - June 4, 2020

With tax season extended, you can now plan a little longer on the best way to use that hard-earned cash you get with your tax refund. While COVID-19 shutdowns are still active in some states, now is the time for credit repair and getting your finances in order (with a little preplanning!).

Tax Season Has Been Extended

If you haven’t filed your taxes yet, you still have time. Due to the coronavirus pandemic, you now have until July 15th, 2020 to submit your state and federal tax returns.

Along with stimulus checks and the extended tax season, you have another advantage when it comes to credit repair: you can check your credit reports once a week from all three major credit reporting agencies (Experian, TransUnion, Equifax), until April 2021. You can request all three reports for free at

While spending that tax return cash on a trip or some new tech is tempting, if you have credit issues and you’re hoping to come out the other side of this pandemic with good credit, you use this chunk of cash to your advantage. We’ve got five tips about using a tax refund to work on your credit score or help finance some big-ticket items.

5 Smart Ways to Use Your Tax Refund

1. Save It

Save that tax refund or stimulus check for a rainy day. You may not see the results of this savings for a while, but in times of crisis, not having a cushion can break you. A few missed payments may not seem like a big deal, but missed payments can really damage your credit score.

Payment history carries the most weight when your FICO credit score is calculated. If you want to have a good credit score, a good repayment history without bumps in the road is extremely important.

It’s not likely that everything you pay is reported to the credit reporting agencies, but most creditors report missed and late payments rather quickly. Not having a savings cushion can mean missed payments if something comes up, and negative marks on your credit reports remain for up to seven years.

2. Repair Your Investments

This can mean fixing up your home, repairing your car, or anything else big! Keeping up on the maintenance of your house or vehicle is important, so that they increase or retain their value. Home improvements and car repairs tend to be large expenses, but even if your tax refund doesn’t cover the entire cost, it could certainly help.

3. Pay Down Debt

If you have student debt, a car note, or just some negative accounts, now could be the time to pay those off. Additionally, student loans aren’t accumulating any interest right now due to the COVID-19 pandemic, which means you’d be paying directly on the principle.

If you have a credit card balance that’s 30% or more of your credit limit, you should consider paying it down with your tax refund. A higher balance on your credit cards lowers your credit score. Your amounts owed is the second most important factor when determining your credit score.

4. Consider Credit Repair

If you’ve reviewed your credit reports and they’re riddled with errors, a credit repair company could be the way to go. Credit repair companies don’t simply boost your score because you paid them – they dispute inaccuracies on your reports for you.

This service usually comes with a monthly price, and maybe a start-up fee, but if your credit reports are covered in errors and you don’t have the time to dispute and keep track of the bad accounts yourself, a credit repair company could really help.

Errors can lower your credit score, but you can work to get them removed and watch your credit score rise with the help of a credit repair company that knows how to dispute inaccuracies and works with the credit bureaus and creditors.

If you’re thinking about paying a company for credit repair, check out our trusted partner.

5. Down Payment for Auto Loan

If you’re a bad credit borrower, you may have heard that you’re going to need a down payment to get into a car. This is true, since subprime lenders need to see that you’ve got some skin in the game.

Your tax refund or stimulus check could provide that boost in your savings and help you meet that down payment requirement. If you’re working with a subprime lender, expect them to require at least $1,000 or 10% of the vehicle’s selling price (sometimes whichever is less).

Another bonus – if you’re looking to repair your credit, an auto loan (installment loan) is a great way to build a good repayment history, and contribute to your credit mix, while improving your credit score at the same time.

Getting Connected to a Car Dealership

Here at CarsDirect, we’re experienced in helping bad credit borrowers getting connected to the resources they need to start improving their credit score.

If you want to get matched to a local dealership with subprime lenders, complete our car loan request form. It’s free, secure, and we’ll get to work looking for a dealer in your area right away.


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, Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

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