Assessments are an essential part of living in an HOA; the association cannot function without proper funding and preparation. Because late or unpaid assessments hurt the entire community, credit reporting is one way to ensure that residents pay assessments in full and in a timely manner.
Is it legal for an HOA to report a homeowner who is delinquent in paying their HOA assessment fees?
Yes, it is perfectly legal for an HOA to report a homeowner who is delinquent in paying their HOA assessment fees. Whether or not the HOA is the entity that does the actual reporting will vary from community to community. Membership with a credit bureau is costly, so small organizations, such as many homeowners’ associations, generally don’t have one. However, if a homeowner becomes delinquent, the association may hire a collection agency to gather the money that is owed. Collection agencies hold contracts with credit bureaus, and therefore, the unpaid debt will be recorded on your credit file.
It is important to note that the homeowner is legally entitled to access the information that consumer reporting agencies collect, as well as dispute any inaccuracies.
How does falling behind in HOA assessments affect one’s credit rating?
An outstanding collection account can be quite detrimental to one’s credit rating. Not only is the collection account listed as a negative report, but once the debt is paid, the negative information does not get removed from the credit report. Both paid and unpaid collections can remain on a credit report for up to seven years! While on the report, this will have a negative impact on any efforts to qualify for a loan or other form of credit (including purchasing a home or vehicle), and can also affect the homeowner’s ability to obtain a job.
What can a homeowner do to protect or improve their credit rating?
To protect or improve a credit rating, a homeowner can be sure to remain current on all HOA assessments, mortgage payments, and other bills. One should do everything possible in order to make full and timely payments; this should also include not taking on any payments that he or she will not consistently be able to pay. For example, a person should always be aware of how much the monthly association dues will be, and be able to commit to paying that amount, before going under contract on a property.
Related: Past Due HOA Assessments
For more questions regarding the management of your HOA community, contact Spectrum today and see what makes us one of the top HOA management companies in Arizona and Texas.