Association Fees and Your Credit
When you can’t, or don’t, make payments on personal loans, your credit is quickly affected. Until now, HOA assessments were not included in your credit score calculation. However, Equifax has now decided to start using this information to help determine individual’s credit scores. Check out how this will affect associations and homeowners alike.
Equifax Will Include Assessments
Equifax, which is one of the major credit reporting bureaus, recently announced they will start including assessments and common area fees from HOAs to calculate credit scores. This means homeowners who fall behind on their assessments will see it impact their credit scores on Equifax. Unless the other credit bureaus begin using the assessments to calculate credit scores, it won’t impact Experian or TransUnion.
What Do the Fair Credit Reporting Act and Fair Debt Collection Practices Act (FDCPA) Include?
The Fair Credit Reporting Act and the Fair Debt Collection Practices Act typically only apply to third parties that collect and report credit information to others, and don’t include associations. Associations have argued that the FDCPA does not apply to them because the overdue assessments aren’t considered personal debt. They are considered liens against the property. HOAs have been successful in arguing that assessments are excluded from the FDCPA, but that doesn’t mean they don’t have to report to Equifax.
What’s the Problem?
There are several problems with forcing HOAs to report to Equifax. For starters, the FDCPA places fines and penalties against anyone who provides inaccurate reports. This puts a lot of pressure on the association to report correctly, and because an HOA doesn’t typically have excess money, it may not be able to afford a penalty. Secondly, the association must be completely consistent in the way they complain. If they report a minority who is behind but forget to report a white owner, it could be viewed as discrimination, even though it was just a mistake.
Nobody chooses not to pay their HOA dues. It’s typically because they can’t do so financially, so threatening a homeowner doesn’t help. Forcing associations to report to Equifax when homeowners fall behind on assessments only puts extra strain and stress on the HOA and homeowners.
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