Will This Affect My Credit?
Ever Panic About What Can Impact Your FICO? This Article is For You.
When it comes to the game of financial football that tends to consume our daily lives, we’ve all fumbled. That time you were out of town and forgot to pay your electric bill. That morning you accidentally missed the toll booth and went through the passholder lane without, well, a pass.
These things happen to the best of us. But can they tank your credit in addition to ruining your day? The good news is not everything that seems like it could affect your FICO actually does.
From a forgotten bill to jail time, here are eight fairly typical financial dings—and the chances of whether they’ll end up on your credit report.
Before you read on, here’s an important note from our lawyers: Fair does not provide legal advice. The below is for informational purposes only. It is not intended to provide legal advice and should not be relied on for such. We'd also like to note that this blog post focuses on credit reports from the three nationwide credit reporting agencies (Equifax, Experian and TransUnion), but there are other types of consumer reporting companies that might handle the situations discussed in different ways.
Unpaid Medical Bills
According to Experian, medical bills that haven’t been paid after 180 days are fair game to affect your score. This grace period is meant to give time for insurance payments to kick in. But after that time period ends, these charges may very well show up on your credit report.
Traffic and Parking Tickets
Let’s hear it for the National Consumer Assistance Plan ("NCAP")! The NCAP is an initiative launched in March 2015 by the three nationwide credit reporting agencies. Its implementation has resulted in a series of actions and procedural changes intended to improve credit reporting data accuracy, quality and consumer credit education. One such change is the removal of debts that do not arise out of a mutual contract or agreement from a consumer's credit report.
So whether you got nabbed going 20 mph over the limit or overstayed your welcome in a metered spot outside your favorite restaurant, it should not show up on your credit report. Of course, if you outright refuse to pay your fine and the municipality passes you off to a collection agency, all bets might be off if yours reports to the credit bureaus. Once something goes to collections—no matter the source—it could affect your credit score. So, you know, pay those parking tickets.
A bankruptcy may very well affect your credit. In fact, it can stay on your credit record from 7-10 years. While it’s possible to recover from, it will likely follow you for quite some time and be a real bear to crawl out from under.
But now, thanks to the NCAP mentioned above, bankruptcy is about the only public record that should show up on your credit report; things like civil judgments and tax liens should not. Unless, as mentioned above, you fail to pay them.
Unpaid Tolls and Red Light Cameras
Red-light cameras are seemingly around every corner. But because of the NCAP initiative, if you get a ticket from a red light camera, it should not impact your credit report, unless you fail to pay the associated fines. Same with toll booths. Again, this doesn’t mean you won’t end up paying a pretty penny in fines in these scenarios. But as long as you pay what you owe and the fines don’t go to collections, neither of these should affect your credit.
Okay, so these bills don’t normally end up on your credit report—unless you’re really behind on your payments.
Luckily, that bill that sat in your mailbox a day or two too long (and is now past due) won’t hurt you. But you do have to pay it to avoid an impact to your FICO score. Experian, for example, warns against waiting for a charge-off or allowing unpaid bills to go to collections.
So if you made your electric bill payment a day or two late, don’t sweat it. Just be warned that utility companies are allowed to sell overdue accounts to debt buyers, who do report to credit agencies—which is how your late gas bill could end up being a credit nightmare.
If you’re out one night and accidentally use your debit card a few too many times and overdraw your account, it won’t end up on your credit report. Just make sure that you get your account back into good standing as soon as possible.
If you don’t pay it up, that balance could go to a collection agency. And, yes, you’re probably noticing a trend here—if it goes to collections, it may negatively impact your FICO score. An overdraft is no exception.
Although an overdraft is generally not reported to a credit bureau, an overdraft may be reported to a debit bureau that collects information on checking accounts. Such information could then be used in background checks, housing applications and applications for new deposit accounts.
If you’re behind on child support payments and you pay through a government entity such as a state department or division, this may be reflected on your credit report—although many states require child support enforcement agencies to notify you before reporting such information. Also, it could stay on your account for up to seven years if you let your account fall behind. Yikes.
States are responsible for reporting delinquent child support totals to credit agencies so that lenders can understand a parent’s total debt, while the Fair Credit Reporting Act mandates that the information be accurate. A custodial parent may also use a collections agency to collect past-due child support, and as with anything that goes to collections, this is likely to negatively impact your credit score. However, if parents are making on-time payments, they’ll likely stay out of hot water with their FICO scores.
While it’s hopefully not your top-of-mind fear, a credit report from one of the three national credit reporting agencies won’t reflect prison sentences or jail stays, although once again those are reflected in Lexis-Nexis data available to creditors. However, what can hurt in those scenarios is the combination of lost paychecks and lapsed bills that can come with the situation.
Since it’s unlikely that someone would have any meaningful income in prison, they could very well have trouble with bills like a car payment, child support or a mortgage. Not paying these things will likely impact your credit record—and that’s where the real damage comes in.
The bottom line in most of these cases is this: Being responsible about bills and debts will generally keep your credit report clean. And with the added protection of the National Consumer Assistance Plan, it’s a lot harder for things you didn’t agree to or know about to end up on your credit report.