Walking away - does it really impact credit?

[mdurette]

Just more of a curiosity question. Has anyone ever had their credit impacted due to walking away from maintenance fees or a TS loan?

I have been a loan officer for over 20 years and review credit reports daily. But, I have never seen anything negative on a consumers report related to a timeshare.

I would find it odd in 20 years and 1,000s of credits I have reviewed that there wasn't even one person to default on a timeshare.

 

[csxjohn]

Just more of a curiosity question. Has anyone ever had their credit impacted due to walking away from maintenance fees or a TS loan?

I have been a loan officer for over 20 years and review credit reports daily. But, I have never seen anything negative on a consumers report related to a timeshare.

I would find it odd in 20 years and 1,000s of credits I have reviewed that there wasn't even one person to default on a timeshare.

I have often wondered what weight a loan officer would put on a default for TS maintenance fees?

There was one post I remember reading where the individual said he gives it no weight if everything else is in order.

How would you handle or react to it if you saw it on an application?

 

[RX8]

I worked as a credit analyst reviewing applications for car loans. While it was few and far between I have seen charge offs and collection accounts relating to timeshares on bureaus. At the time I knew very little about timeshares but what I did know was that they were known for high pressure sales tactics.

If that was the only derog on the bureau it really did not impact the decision. That said, any derog item will have an impact on the credit score and ultimately you could pay more in interest charges.

 

[Passepartout]

It is possible that a default could be reported by a finance company, and would just state that the debtor defaulted . On a loan without specifying what the loan was for. Or buried in someone's morass of credit card charges.

The only charges that might show up as TS related would be MF defaults, and that might be disguised as payments to XYZ Corp.

Jim

 

[mdurette]

I have often wondered what weight a loan officer would put on a default for TS maintenance fees?

There was one post I remember reading where the individual said he gives it no weight if everything else is in order.

How would you handle or react to it if you saw it on an application?

Aaah....well in terms of mortgages we all live in the world of FICO. It is actually a terrible thing in some cases. To answer your question, if it showed up and impacted the FICO (credit score) the consumer would get whatever hit to their loan that the FICO score represented. That may mean a higher rate or even a denial.

I will give you an example of something I see a few times a year which it why I call it a terrible thing in some cases.

Preapprove a buyer with a 740 credit score at a rate of 4.25%
Credit reports are only good for 3 months - they will close on their house purchase in 4 months. So, we need to repull a new credit.
Score is now 650 and causes a rate jump to 4.625%.

Why did the score drop 90 points? A $20 medical collection that was put on the report last month. Probably just a co-pay that was missed.

Medical collections are the worse - they report everything.

So....in this example, a measly $20 collection will cost the consumer $1,000's in interest over the years.

As a loan officer - do I think this is right? Nope, not at all. But, Fannie Mae and Freddie Mac are FICO score based and it is as simple as black and white to their pricing

I am lucky to work for a small community based bank and sometimes we can look a scenarios like this on a case by case.

 

[csxjohn]

Aaah....well in terms of mortgages we all live in the world of FICO. It is actually a terrible thing in some cases. To answer your question, if it showed up and impacted the FICO (credit score) the consumer would get whatever hit to their loan that the FICO score represented. That may mean a higher rate or even a denial.

I will give you an example of something I see a few times a year which it why I call it a terrible thing in some cases.

Preapprove a buyer with a 740 credit score at a rate of 4.25%
Credit reports are only good for 3 months - they will close on their house purchase in 4 months. So, we need to repull a new credit.
Score is now 650 and causes a rate jump to 4.625%.

Why did the score drop 90 points? A $20 medical collection that was put on the report last month. Probably just a co-pay that was missed.

Medical collections are the worse - they report everything.

So....in this example, a measly $20 collection will cost the consumer $1,000's in interest over the years.

As a loan officer - do I think this is right? Nope, not at all. But, Fannie Mae and Freddie Mac are FICO score based and it is as simple as black and white to their pricing

I am lucky to work for a small community based bank and sometimes we can look a scenarios like this on a case by case.

Thank you, that confirms what RX8 has said, the credit score will be impacted with a non payment but won't necessarily be denied credit over the one incident.

 

[ace2000]

I think everyone agrees that there will definitely be a hit to your credit score.

The question is does anything happen beyond that for the non-payment of MFs? There were some TUG members previously reporting court orders and wage garnisments for MF non-payment. Anyone know that answer?

 

[theo]

Some thoughts...

I have been a loan officer for over 20 years and review credit reports daily. But, I have never seen anything negative on a consumers report related to a timeshare.

I would find it odd in 20 years and 1,000s of credits I have reviewed that there wasn't even one person to default on a timeshare.

With all due respect and readily acknowledging your considerable experience as a loan officer, I submit that your conclusion might be a bit premature and based upon incomplete information.

To be more specific, most loans taken to acquire a timeshare involve a third party financing entity. In the event of a default on the associated loan and subsequent reporting thereof to the credit agencies, there would likely be no reference of any kind to the fact that the loan default was somehow associated with a timeshare purchase.

In short, you may very well have seen such reporting, but it would not "jump off the page" as timeshare related. In your work, an unpaid loan and default is just an unpaid loan and default thereon, no?

Just sayin'...

 

[glenmore]

I can understand a hit to your credit if you walk away from a loan on a timeshare. But what happens if the timeshare is paid in full, and you walk away from the maintenance fees.

If the timeshare is in another country, and they do not have your social security number, can they impact your credit score?

 

[Miss Marty]

You can`t always walk away from timeshare maintenance fees


Even if the amount in under $500

It goes on your credit report as
Public Record - Judgment Type
DEFAULT JUDGMENT ENTERED

 

[theo]

Exactly so...

Even if the amount in under $500

It goes on your credit report as
Public Record - Judgment Type
DEFAULT JUDGMENT ENTERED

I spent a few terms on the BoD of a resort where I formerly owned a few weeks. The mf delinquency rate at that particular facility was relatively low and foreclosures were (fortunately) infrequent. If collection agency efforts failed on delinquent accounts and foreclosure became necessary, the BoD made certain that the subsequent court-entered default judgements were made known to the credit bureaus promptly thereafter.

I don't know the actual mechanism of reporting post-foreclosure default judgements to the credit agencies, as I was not directly involved in that procedure. However, I do know for a fact that such reporting was always initiated and completed after each and every foreclosure at that particular facility. Can't say that I personally know much about the post-foreclosure reporting practices at other places, however.

 

[bogey21]

Just more of a curiosity question. Has anyone ever had their credit impacted due to walking away from maintenance fees or a TS loan?

I have asked this question numerous times. I don't ever recall a TUGGER ever saying "it happened to me". This may be because TUGGERS don't walk away from their obligations or because it rarely happens. My guess is that defaults on MFs are rarely reported and that defaults on loans are more often reported. Just my guess.

George

 

[Rent_Share]

The 64,000 question, due to the costs associated with collecting an international debt, would a Canadian be impacted by walking away fro a US or Mexican contract or a US resident be impacted by defaulting on a Canadian or Mexican contract, or a Mexican ....., or Citizen of any other country ?

IMHO NO

 

[LannyPC]

How would you handle or react to it if you saw it on an application?

I guess one of many jobs of a loan officer at a financial institution (FI) is to grant as many loans as possible because it:

1) earns interest for the FI and
2) establishes a good relationship with the client so that the client may be more apt to deal with the FI for other services (mortgages, RRSPs, lines of credit, etc.)

But of course the loan officer has to be careful of handing out loans to just anybody because a loan in the wrong hands will be very costly for the FI.

That being said, if I were a loan officer and I saw the client's application or credit score showing that he defaulted on either a TS mortgage or the MFs, I would have to look at three different approaches.

There are two glass-half-empty approaches:

1) He defaulted on this loan. What's he going to do with another loan?
2) He's obviously a bad investor. He borrowed money (tens of thousands of dollars) to "invest" in something that he just walked away from. If we grant him a loan, will he use the money wisely or will he make another bad investment and default on the loan?

Or, the glass-half-full approach would be: He did what he had to do to relieve himself of this financial burden. This will now free up [insert amount of annual MF payments here and possible amount remaining on mortgage] for him to pay back the loan in addition to the other money that he would have been spending on vacations.

Based on that I would cautiously take the glass-half-full approach if everything else he has is in order, the default judgment happened a number of years ago, it's the only black eye on his credit history, and he has a proven steady income.

People deserve second chances and many creditors are willing to do that for people.

 

[stanleyu]

I never defaulted on a TS payment, so can't speak to that. However, a few years back I did have two weeks at a Florida TS that I no longer wanted. I had retired, income was much less, and I no longer could afford it. So what I did was I contacted the TS managements and told them just that. I told them I tried selling it and tried giving it away with no luck (which was true). I also told them that in no way could I afford to pay dues any more. They said I could sign it over to the TS management with a quit claim deed, which I did. They took it back and resold it. It saved them the cost of taking legal action and it got me out of making payments.

So the bottom line is that before you walk away I would highly recommend doing what I did. Contact the TS management and lay it on the line. You've got nothing to lose, and it may well get you off the hook without risking your credit rating.