Dear Credit Score Report,
I received a photo ticket in a state other than the one in which I reside. I have not yet paid the citation, which is labeled a civil penalty rather than a criminal penalty (since photo tickets apparently are hard to prove beyond a reasonable doubt). I have received a letter saying that if I don’t pay the penalty, the county will report it to a collection agency, which will then affect my credit. Putting moral considerations aside for the moment, can my credit actually get dinged for this? What do traffic safety and credit have to do with each other? — James
You should pay that citation: When an unpaid traffic ticket gets turned over to a collection agency, the driver’s credit score may fall, perhaps substantially.
Traffic safety and credit may not seem related, but think of that ticket as a debt owed to the county that issued the citation. Just like any lender, the county wants its money and will take steps to collect. Unfortunately, if you still don’t pay, the municipality appears ready to use a powerful technique to more emphatically urge you to do so — one that isn’t limited to traffic citations. “If a municipality turns a consumer debt, such as a moving violation, parking ticket or library fine, over to a collections firm, and the collections firm reports it as a collection account to the credit reporting companies, it may have an impact on an individual’s credit score,” says Steven Katz, spokesman for credit bureau TransUnion. Since a lower credit score makes borrowing more difficult and costly, that risk makes for a more convincing argument for you to pay.
According to experts, your situation isn’t entirely unusual. “Many large municipalities are reportedly sending long-overdue traffic citations, and even overdue library fines, to collections agencies in order to recover those fees,” says Craig Watts, spokesman for FICO, creator of the most widely used credit scoring model. In other words, it isn’t getting a ticket that hurts your credit score, but waiting so long to make a payment that it ends up in collections. “While traffic citations aren’t reported to credit bureaus, accounts in collection are often reported to bureaus,” Watts says.
Collection accounts that appear on your credit reports will damage your credit score, since they suggest an irresponsible borrower who may not repay future debts. “Because accounts in collections are strong predictors of future credit risk, the appearance of a collections account on your credit report could have a serious negative impact to your FICO score,” says Watts.
Just how bad can the damage get? FICO says the impact varies, depending on such factors as the age of the collections account and other delinquent accounts, but indicates that borrowers with high FICO scores could experience a nearly 100 point decline. Consumer advocates say they’ve seen such damage firsthand. “I have seen scores fall off by almost 100 points when a collections account goes on the credit report,” says Linda Sherry, national priorities director for nonprofit consumer rights group Consumer Action.
Before you assume the worst, however, be aware of several factors that can prevent credit score damage:
- Length of time. If you only recently received that warning letter, you still have some time before any damage occurs. Experts say it usually takes awhile before unpaid debts get turned over to collection agencies. “In addition to the initial issuing of the ticket, there are typically at least one or two attempts to contact the person directly, often at 30-day intervals, before the debt is sent to a collection agency,” says Rod Griffin, director of public education for credit bureau Experian. Those months could buy you time to come up with the cash needed to pay the citation.
- Being proactive. If you already have the money, making that payment now will prevent headaches later on. Drivers “always have the right to contest these citations, but most just pay because they do not go on your driving record,” Sherry says in an e-mail. “So there is no downside (such as increased auto insurance rates) to getting or paying one except the cost.” In some states, you can even get a traffic citation dismissed by taking a defensive driving course.
- Citation amount. Aside from making the citation easier to pay, a low-cost ticket doesn’t always count against your FICO score. According to the company, in the “most recent update to the FICO scoring formula, which we call FICO 8, we changed the model so that it ignores collections accounts for amounts less than $100,” Watts says. How common is that new scoring model? FICO says that several months ago, FICO 8 was being used by 1,000 lenders.
Of course, there are times when you may decide to put up a fight. If the ticket was issued unfairly — perhaps a blurry photo mistakenly identified your car or a family member was driving at the time — you can challenge the citation. “If the consumer or the consumer’s designee appears in court and the matter is dismissed, then it should not be turned over to collections,” Katz says. (Just make sure to pay any court costs in a timely manner.) Other experts agree. Sherry explains that, in some cases, you may not have to appear in court. Most places “allow you to contest citations by mail. As you know, these photo tickets are a real moneymaker for local governments,” she says.
You may also want to take action if a collections account is unfairly ruining your credit history. “Assuming the citation is removed from the public record, the person should be able to dispute the entry as incorrect and have it deleted from their credit report,” Experian’s Griffin says. “Documentation, such as a letter from the court showing the citation was invalid, will also help in removing the information from their credit report,” he says. Additionally, consider adding a note to your credit report that explains the situation. “Consumers can always place a 100 word consumer statement on their credit reports to explain special circumstances. However, this will not change any impact such an item may have on the credit score. It will simply provide some additional context for a lender/creditor/other reviewing the consumer’s file in the future,” Katz says in an e-mail.
However you decide to proceed, be sure to protect yourself by always driving — and borrowing — very responsibly.
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