As municipal governments increase efforts to collect unpaid
parking tickets, dog-catcher fines, library fines and the like,
some consumers are seeing a surprising impact--a radical drop in
their credit scores.
To each individual consumer, the fines in question may be very
small and collection actions may seem petty and unnecessary. For
many cities, however, these unpaid fines and fees add up to
millions of dollars a year. Those dollars can be collected with
little investment by the cities if they're turned over to
private collection agencies.
Private agencies typically charge a percentage of the balance
actually collected, so there's no risk to the government. The
risk to consumers who don't make those payments in a timely
manner, however, is significant. That's because collection
agencies report delinquencies to the three major credit
reporting agencies. A single collection item can drop your
credit score as much as 100 points. Many consumers don't know
that charges like this can affect their credit.
While not all municipalities use private collection firms, the
trend is increasing across the country. As government collection
activity rises, so does the number of consumers surprised to
discover that they're paying higher interest rates--or being
turned down altogether--because the kids lost a library book or
they neglected to renew Rover's license.
If such charges are already appearing on your credit report, you
may be able to negotiate their removal in exchange for payment.
Getting items removed from your credit report can be a long and
stressful process, though, and there's no guarantee that you'll
be successful. The best defense is to be aware of the risks and
make sure you pay those parking tickets on time.
(C) 2006, Total Bankruptcy, Inc. This article may be reproduced
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About the author:
Tiffany Sanders is an attorney who has published two books. Her
articles have appeared in numerous newspapers, magazines,
newsletters, and web resources in the United States and
Australia. She writes bankruptcy law news and articles for
www.TotalBankruptcy.com, where sponsoring attorneys provide
extensive consumer information and resources related to
bankruptcy filing and rebuilding credit after bankruptcy.
