Home > Credit Score > Could Your HOA Wreck Your Credit?

Comments 2 Comments

If you live in a community within a homeowners’ association, you probably have to pay association dues. They can run anywhere from less than $100 a year to more than $1,000 a month, depending on the community.

What happens if you don’t pay? Will it ruin your credit rating?

It certainly can, as some of our Credit.com readers have found out:

  • “Not Guilty” is dealing with damaged credit as the result of judgment arising from unpaid (and disputed) HOA dues.
  • “Justneedmoretime” can’t get a loan modification due to the lien for homeowner dues placed against the property — and has received a court summons.
  • “Sue” has also been taken to court after withholding her dues because the association did not make repairs she believes they were required to make.

All of these readers are facing severe negative items on their credit reports that can significantly drop their credit scores.

What can HOA members do to protect themselves?

First, understand that dues typically don’t show up on credit reports unless there is a problem. Mike Hunter with Horack Talley in Charlotte, N.C. represents more than 500 HOAs in North Carolina. He says, “None of the HOAs I represent nor their management companies report debts to the credit bureaus. They only way they could show up is if a lien, foreclosure or judgment is filed. The reporting agencies have people that comb the public records for this information, and that’s the only way it can show up in a homeowner’s credit report.”

How to Avoid Credit Damage

Having trouble paying your dues? “Try to make a payment arrangement with the HOA to get you caught up,” suggests Mike Boyd who has been the president of his HOA for 13 years. “It’s also best to do this before your account is sent to the HOA’s attorney for collection, because as soon as that happens you will also be liable to pay all the attorney’s fees and expenses for handling this matter,” he says.

Take this obligation seriously. Don’t assume that just because you are delivering the check to someone in your neighborhood that you can let it slide if you’re short on money that month. “HOA obligations due on a property are legally binding promises that are enforceable under the law,” warns Matthew Reischer, Esq., CEO of LegalAdvice.com. “HOA collections can result in assessments, interest, violations, late fees and fines. The debt owed can also result in a lien on the property or be a basis for wage garnishment proceedings,” he adds.

Monitor your credit. If you are experiencing any problems paying your dues, get your free credit report once a year to see whether anything has been reported. It is also a good idea to get your free credit score monthly so you’ll be aware if it changes dramatically.

And before you buy a home within one of these communities, make sure you read and understand the deed restrictions. “If you paint your house, you had better pick exactly the right color if you live in a home that is subject to a homeowners’ association. If you are late on your assessments, you may find yourself out of a home,” warns Kenneth G. Eade, an attorney who has seen both of those situations and plans to incorporate those kinds of problems in his next novel in the Brent Marks Legal Thriller Series. “These (battles) have diverted the income that my clients could have used to remedy these petty problems when HOA busybodies would rather litigate to get their way than to compromise. “

“Does it affect your credit rating?” he asks. “That and all other aspects of your financial life!”

More on Credit Reports and Credit Scores:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • http://www.Credit.com/ Gerri Detweiler

    Fascinating! Thanks for your insights.

  • http://www.snapcollections.com MITCH DRIMMER

    A recent study conducted sponsored by a major credit
    repair firm and conducted by Harris Poll asked specific questions
    related to what people understand about credit scoring, how they are arrived at, and the information that is taken into consideration to determine them.

    The study revealed some surprising information. Even though credit scores affect Americans in many important ways including the price they pay for credit and insurance many people are mis-informed about the entire process. This is shocking as your credit score can not only affect your ability to get credit but also impact on your ability to obtain employment.

    By not understanding how credit scores are formulated consumers could reduce those scores and impact their lives in negative
    ways. This can affect your entire life according to the experts who
    sponsored this survey.

    The survey which was conducted by the Harris Poll showed these alarming results:

    According to the results of the survey, while 63% of Americans are at least somewhat concerned about their current credit score, a quarter (25%) of those who have a bad or fair credit score, say they are prevented from taking action because they don’t know where to start.

    A few surprising findings uncovered were:

    1. 45% of U.S. adults are only somewhat familiar with what goes into their credit scores, and 14% say they’re not familiar at all with the process.

    2. 21% of U.S. adults are not sure what information appears on a credit report

    3. 41% U.S. adults say they are very concerned/concerned about their current credit scores

    4. 18% of U.S. adults mistakenly believe that online purchases factor into credit score calculation

    5. 18% of U.S. adults mistakenly believe gender factors into credit score calculation,

    6. Of those who have a bad or fair credit score, 30% say they are
    prevented from fixing/taking action on their credit score because it is too expensive to fix it.

    Community associations are faced with delinquent owners every month, in good times and bad times, but the problem is even more serious. When some property owners don’t pay their fair share the problem can go viral in that the shortfall is passed through to good paying families who have budget well but are not prepared for an increase in their maintenance fees. A domino effect happens and where only a few people should have their credit scores affected many more do. This can be prevented by early reporting of delinquent property owners.

    The solution is not to change the credit reporting system but to
    utilize it so that the delinquent owners who start this potential cycle
    of pain are made aware of the damage they are doing to themselves and their neighbors. Community associations must consider utilizing collection agencies to get those early delinquencies reported so that payments will be made and others are put out of harm’s way. If you are on a board of directors of a condo or HOA do association, yourself, and the good paying members a favor and have the delinquent owners reported to credit bureaus so that they will take action to make timely payments.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team