Any time you default on payments you’ve contractually agreed to make, it has the potential to hurt your credit score. A timeshare default is no different. Depending on the specifics of your timeshare agreement, default could lead to collections actions, civil judgments and even foreclosure, any of which could appear on your credit report.
Buying Basics Timeshares are either deeded or non-deeded. In a deeded timeshare you are a legal part-owner of your timeshare unit, as are the others who have paid for the unit. In a non-deeded timeshare, by contrast, you are essentially leasing the unit; you have paid for the right to use the unit at certain times, but the unit is not your legal property.
While the conditions of owning a timeshare can vary, there are generally two kinds of costs: the cost of acquiring the timeshare in the first place, and regular “maintenance” fees that pay for upkeep of the property as well as for administration and marketing of the development. Failing to pay the required costs of a timeshare might lead to actions that can affect your credit score.
Rights and Obligations of Timeshare OwnershipIt’s important to understand your rights and financial obligations as a timeshare member or owner. Failing to clearly understand the terms of your timeshare agreement could possibly cause financial problems that could end up on your credit report later on.
Defaulting on PaymentsIf you’re late with either kind of timeshare payment or miss a payment, the property manager might report that fact to credit bureaus. If the property manager turns your account over to a collections agency or requests a judgment against you in court, it will most likely appear on your credit report. If you default on payments in a deeded timeshare, the property manager may go further and foreclose on your unit – that is, take back your ownership. This may appear on your credit report like any other foreclosure, and the damage to your score can be severe. Get in the habit of checking your credit report to see what information may have been added.
How Long It LastsUnder the Fair Credit Reporting Act, the federal law that regulates the information included in credit reports, most negative information can appear on your report for up to seven years. That includes late payments, collections actions, civil judgments and foreclosures. Each credit bureau has its own scoring formulas, so the specific effect of adverse information on your credit score may vary depending on which bureau is providing the score and whom it’s providing the score to.
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About the Author
Cam Merritt has been a professional writer and editor since 1992, specializing in articles about personal finance and law. He has contributed to USA Today and the Better Homes and Gardens family of magazines and websites. Merritt has a Bachelor of Arts in journalism from Drake University.
This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.
Published by permission from ConsumerInfo.com, Inc., an Experian company. © 2014 ConsumerInfo.com, Inc. All rights reserved.