Bank Levies and their Effects on Credit Scores
If you have recently received a bank levy on your checking or savings account, then the odds are that you are stressing out about this. You may be wondering how you are going to pay your bills when your funds are frozen and what other effects you can expect once the levy goes through. One thing that you may be concerned about when a bank levy happens is what kind of effect it's going to have on your credit score. Knowing this is important, as it could affect your financial future significantly.
If your bank account is levied by your creditors, it could have a negative effect on your credit score. There is an important distinction to make, though, when you are discussing this important issue. It's not the actual bank levy itself that will affect your credit but the actions taken to receive the levy as well as what the levy will keep you from doing. These financial situations and issues are the real culprits when it comes to having a negative effect on your credit score.
Factors Affecting Your Credit Score
If a creditor wants to levy your bank account, then a court order must be obtained before this process can be completed. This applies to all creditors except the United States government. After a lawsuit has been filed against you for not paying what you owe, then your creditors will be able to obtain a judgment against you and get their money by issuing a bank levy on your account. When this happens, the court judgment is then going to become a matter of public record. That means that it's going to go against you as a derogatory entry on your credit score.
If the IRS wants to levy your bank account, then it is not going to need a court judgment in order to do so. If you owe back taxes that you have not paid, then the IRS may levy you bank account with a simple tax lien. When this happens, the tax lien is going to be entered onto your credit report and it's going to do some damage. As such, it's important for you to make arrangements with the IRS to pay your taxes before things like this end up happening. Otherwise you could face serious consequences.
When a bank levy is placed on your account, it is usually because you have missed a lot of payments to a creditor. After multiple attempts and warnings, the creditor has been forced to get a judgement or tax lien against you. In the process of not working this out and missing payments, you are damaging your credit score in a very bad way. Each time that you miss a payment or make a late payment, this is going to effect your credit score. If you want to make certain that this doesn't happen, then you need to make a better effort to pay your bills.
Making Payments During a Levy
Bank levies and their effects on credit scores can be quite devastating, but you need to make sure that you don't make matters worse while the levy is actually going on. When your bank account gets frozen, you will run the risk of not being about to pay all of your other creditors. When this happens, then this is only going to make your credit score a lot worse. As such, you need to try and resolve the bank levy as fast as you possibly can and get back on track.
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