Past Due Child Support Payments Can Impact Your Credit Rating
While making regular child support payments will not improve your credit score, failing to make child support payments can be reported, and could negatively affect your credit, especially if you have a history of missing payments. Not paying child support on time could cause you to be reported to a credit bureau. Although unpaid child support might not prevent you from qualifying for a home mortgage loan, you could be required to bring any back payments owed up to date before being approved for the loan. Make no mistake about it. Paying child support late can hurt your credit.
How It Works
Being taken to court for unpaid child support can remain on your credit history for seven years, affecting your credit score throughout that period of time. Even if you file for bankruptcy, you still are responsible for bringing any child support payments in arrears up to date, as well as continuing to pay all current payments. Having just one late payment on your credit report could lower your credit score 20 to 30 points. If you already have a low credit score, that certainly will not help. Most creditors and lenders take a careful look at the last three years, so if you have missed or late payments showing up, that could present a problem. Unpaid child support payments can be reported to the three major national credit bureaus if you were ordered to pay support by a court or other administrative process, or you owe past due support that totals at least three times more than the monthly support obligation. In these cases, you will be required to pay any arrears in full before credit bureau reporting will stop.
Other Ways Unpaid Child Support Can Affect Credit
When you apply for a loan, the lender may calculate your monthly child support payment into your debt to income ratio, which compares your percentage of monthly debt to your income. The lower your debt to income ratio, the better the chance that you will be approved for the loan. Lenders calculate child support payments into this ratio to ensure that any new financial obligations will not interfere with your ability to pay child support. On the flip side, since creditors are allowed to use child support payments as an income factor when you apply for credit or for a loan, if you do not receive these payments on time each month, you either could be limited or denied credit, or have your own credit score affected for making late payments.
Collecting Child Support Payments
If you pay child support payments directly to the custodial parent, late payments cannot be reported to the credit bureaus unless that person then contacts an independent child support collection agency for assistance. Once a collection agency becomes involved, both back and current child support payments can be garnished from wages, unemployment compensation, refunds due on tax returns, as well as any lottery winnings. Contact the collection agency immediately if you are having difficulty meeting this obligation. Even if you are able to make only partial payments temporarily, the collection agency may not report you to the credit bureaus if you show that you are making an effort to pay the child support.
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