States vary in how they report it, so impact varies, too
Barry Paperno is a freelance writer and credit scoring expert with decades of consumer credit industry experience, serving as consumer affairs manager for FICO (formerly Fair Isaac Corp.) and consumer operations manager for Experian. He writes “Speaking of Credit,” a weekly reader Q&A column about credit scoring and rebuilding credit, for CreditCards.com. His writings about credit scoring have appeared in The Huffington Post, MSN Money, CBS Money Watch and other consumer finance websites.
Dear Speaking of Credit,
How do delinquent child support payments affect credit scores? – Russ
There are three common ways for child support debt to appear on a credit report. Two can affect your credit score and one cannot.
No matter how the child support debt finds its way to the credit report as a collection, once there, its negative influence can lower a high FICO score (780+) by more than 100 points or continue to suppress an already-low score.
2. Court judgment
A court judgment for back child support usually results from a lawsuit brought on by a state child support enforcement agency or the custodial parent. A judgment can lead to wage garnishment, a property lien, tax refund confiscation or other means of enforcement.
When it comes to the scoring impact from a judgment, the damage done is similar to a collection, with a high FICO score dropping by more than 100 points or an already-low score remaining that way for years.
3. Trade line
Title IV, Part D, of the Social Security Act requires “states to report periodically to consumer reporting agencies [credit bureaus]…the name of any noncustodial parent who is delinquent in the payment of child support and the amount of overdue support owed by such parent.”
|HOW DELINQUENT CHILD SUPPORT CAN AFFECT CREDIT SCORES|
|Credit reporting item||Score impact||How long on credit report?|
|Trade line||Neutral||7 years if past due|
More than 11 million individuals have their delinquent child support reported to the credit bureaus each year. Yet, when appearing only as a credit report trade line – not as a collection or judgment – child support payments have neither a positive or negative effect on their credit scores.
For some underlying background into why FICO scores don’t include child support information, I contacted FICO Principal Scientist Can Arkali, who shared that: “Our research indicates that not every state reports this information and in states that do, the information seems to be reported inconsistently – some states appear to report fully, whereas others seem to report only the negative information. Given the different nature of family/child support payment information relative to much more common credit obligations found in the credit bureau file and the inconsistencies in reporting, our models continue to bypass this information.”
Some of the inconsistencies in the reporting of child support information to credit bureaus include:
- Child support reporting may or may not state whether payments are current or past due.
- With varying time periods used by different states before reporting, delinquent child support is often not reported until the noncustodial parent has received sufficient notification and time to catch up on the past-due payments.
- Some states may report to only one or two, but not all three, credit bureaus – Equifax, Experian and TransUnion.
Since all credit bureau reporting must follow the Fair Credit Reporting Act (FCRA) rules, a state child support enforcement agency is no different than a bank or other lender in its responsibility to comply. Child support-paying consumers receive the same set of rights ensuring the accuracy of this information and the length of time negative information can remain on their credit reports.
Though credit scores are not impacted by this information, lenders often consider delinquent child support trade lines when evaluating credit applications – regardless of the credit score. Even when the credit score is high, requiring late child support payments to be paid in full as a condition for credit approval is not unusual.
The lesson for consumers facing past-due child support tends to be the same as for other types of debt still in the earlier stages of delinquency. If paying the full past-due amount can’t be done right away, making payment arrangements with the child support enforcement agency early on can prevent the long-lasting score damage a collection or court judgment is sure to cause.
See related:Your four choices when dealing with a judgment