Core Insights - The 2026 tax season has begun, with many Americans expecting an average tax refund of $3,167 based on over 10 million refunds issued in 2025, and potential for larger refunds due to recent tax law changes [1]. Group 1: Building Credit with Tax Refund - Tax refunds can be strategically used to build credit, especially for individuals with no credit or poor credit scores [2][3]. - Opening a secured credit card requires a security deposit, often starting at $200, which can be funded by a portion of the tax refund [4]. - Payment history from secured cards is reported to credit bureaus, and timely payments can improve credit scores over time [5]. Group 2: Addressing Late Payments - Using tax refunds to catch up on late payments can help preserve credit scores and avoid additional fees [7]. - Late payments can lead to increased fees and negatively impact credit scores, remaining on credit reports for years [6]. Group 3: Paying Down Existing Debt - Utilizing tax refunds to pay down existing debt can lower credit utilization rates, which may positively affect credit scores [8]. - Even partial payments on debt can reduce overall interest charges and help in managing debt more effectively [9]. Group 4: Alternative Uses for Tax Refund - Tax refunds can be used to build an emergency fund, ideally covering three to six months of expenses, especially in high-yield savings accounts [14]. - Contributing tax refunds to retirement accounts like Roth IRAs can enhance long-term savings, with specific contribution limits to consider [16][17].