Do Credit Scoring Systems Consider Child Support?
Child support payments can go overlooked by people who are not obligated to pay child support. However, it is a fact that many consumers who pay court-ordered child support end up finding a record of those obligations on their credit reports. And like every other type of financial obligation, some consumers don’t make their child support payments, go delinquent, and eventually default, and a record of their increasing level of delinquency can end up on their credit reports.
A debtor may be concerned that a derogatory child support obligation will be reported to one or more of the consumer credit reporting companies: Equifax, Experian and Trans Union. And the debtor’s concern is well founded. Child support accounts, or “trade lines,” are commonly reported to the credit reporting companies.
How Much Will Child Support Hurt My Credit Scores?
This is an area where the story regarding defaulted child support payments diverges from that of other defaults on credit-related obligations reported by garden-variety financial services companies, like card issuers or installment lenders. Child support obligations can make their way to a consumer’s credit reports in a variety of ways.
First, child support delinquencies can be reported to the credit reporting companies by the state or local child support agency or by the child support enforcement organization. When reported this way, the derogatory child support obligation appears as a tradeline, just like reports for credit cards and installment loans. If child support is reported as a tradeline, then credit scoring systems do NOT consider it when calculating credit scores.
Second, child support obligations that go into default can be referred to a third-party debt collector or collection agency. It is common for these third-party debt collectors to report the defaulted debt to one, two or all three of the credit reporting companies. If a child support obligation is reported as a collection rather than as a tradeline, then credit scoring systems DO consider it when calculating credit scores.
The extent to which a child support collection will impact credit scores will vary by individual. In some cases, the collection report will be immaterial because so much other, unrelated negative information is already being reported about the consumer. In other cases, the collection will have a substantial negative impact because the consumer has no other derogatory information on his or her credit reports.
Finally, if a parent is sued by the other parent for nonpayment of child support and he or she loses in court, then a civil judgment will be filed against him or her. Such judgments are public records, which means that anyone can see them if they so choose. And while judgments no longer appear on consumer credit reports and can’t negatively impact your credit scores, lenders certainly have other ways to obtain such judgment information.
Of course the best course of action if you have an obligation to pay child support is to make sure your payments are made on time, all the time. That’s smart advice for all payment obligations, not just child support. Making payments on time is the absolute best way to prevent negative and potentially score-damaging information from appearing on credit reports.
Disclaimer: The views and opinions expressed in this article are those of the author, John Ulzheimer, and do not necessarily reflect the official policy or position of VantageScore Solutions, LLC.