Libaries and Parking Tickets: The New Threat to Your Credit Rating

Posted on 04. Jan, 2006 by in News

Claude DaCorsi, a management consultant in Portland, Ore., used to pride himself on his near-perfect credit rating. But during a recent routine credit check, he discovered his credit scores had plunged to “below average.”

The reason: Two late library books, including a picture book taken out for his two-year-old son. The library had turned over the $40 late fee to a private collection agency.

Mr. DaCorsi, who says the black mark affected his interest rate on a home loan, has since barred his children from visiting the library. “We go to Barnes & Noble now,” he says. “We can get books there without fear of retribution.”

This is just one example of a growing trend reported on today by The Wall Street Journal. Apparently a growing number of cities are turning over routine fees – including library late fees, parking tickets, and trash-collection charges – to collection agencies in order to increase revenues. Unfortunately this “brilliant idea” (yes, that was meant as sarcastic) is leaving black marks on the credit of its citizens. Personally, I don’t believe that dinging the credit of your citizens is a great way to cover up the fact that you have misappropriated funds and overdrawn on the city bank account. There are other solutions out there that are less damaging to individuals.

“A library fine reported to a credit bureau, for example, can knock as much as 100 points off a credit score, making it difficult for someone with previously good credit to get the best rate on a loan, consumers and industry experts say. (Credit scores calculated by Fair Isaac Corp., the leading provider of such scores, typically range from 300 to 850; any score above 700 will generally get you the best rate on a loan.) Collections activity can stay on a report for seven years.

Consumers hoping to get municipal fines wiped off their credit records do have some options. Since collections activity can stay on a credit file even after the bill is paid, consumers should try to come to an arrangement before they pay. They should call the government agency or collection company and try to strike a deal that if they pay the fine, it will be removed from their file. The Web site creditboards.com offers sample letters to collection agencies and other advice to help consumers get items removed from their credit files.”

Parking Tickets, Credit Rating, Fines, Fees

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