Dues are an important part of living in an HOA because the money is used to keep the HOA funded. However, many homeowners fall behind on their dues and need a powerful reminder. Credit reporting is a great way to get your residents to pay their late dues.
How Is Credit Reporting Used?
Credit reporting is used to inform the three major credit reporting companies that an individual has paid or failed to pay something. This is most common with banks, credit card companies and mortgage lenders, but now our associations have the ability to report both paid and unpaid dues or other fees. Reports that mention a failure to pay something like HOA dues affects an individual’s credit score, which, in turn, affects their ability to get a loan, buy a home or even get a job.
When Should You Use It?
Some assessments are larger than auto and credit card payments. Monthly reporting of timely payments can increase credit scores and provide property owners with additional benefits outside of the association. However, If residents are failing to pay their dues on time, credit reporting is a great tool to urge them to pay. In fact, in many cases, the threat alone is enough to convince homeowners to pay their past due bills because they don’t want their credit negatively affected. Delinquencies can remain on a credit report and impact a homeowners credit score for up to 7 years. No one wants their credit to be negatively impacted, which is why credit reporting is a great way to urge your residents to pay their late dues.
What about a Lien?
The current solution for unpaid dues was to put a lien on the house. However, this alone isn’t a speedy resolution to delinquencies, especially when compared to the threat of credit reporting. Credit reporting should be used as a tool to discourage residents from not paying dues. Across about 20 states, credit reporting works as a tactic to collect overdue HOA fees about 45 percent of the time. It is best to use credit reporting early instead of waiting until the resident is months behind. Remedies such as liens and foreclosure should still be pursued when credit reporting hasn’t compelled the owner to pay up. Using both solutions together can substantially decrease your delinquency rates and potentially lower your legal costs.
How does the credit reporting process work?
Payment history is collected directly from our accounting system and reformatted to allow reporting payment history to the credit bureaus. Property owner disputes are facilitated by Community Association Management, thus removing any hassles of management from the board.
What are the legal considerations when reporting to a credit bureau?
Association assessments are classified as revolving debt payments, much like a credit card or auto loan. Associations have the legal authority to refer delinquent accounts to collection agencies and to report positive and negative payment histories to assist in collecting the debt. The federal and state fair credit reporting acts permit Associations to report payment histories.
To learn more about how Community Association Management can help reduce late or unpaid dues through credit reporting services, or to sign up, click here