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Subject: Intriguing information that could affect HOA delinquencies
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SheliaH
(Indiana)

Posts:4280


01/27/2020 5:13 AM  
One of my e-newsletters ran an article last week on FICO scores (the score based on your credit history that can determine if you get new credit with favorable terms). Fair Isaac Corp., the company behind the FICO system announced its new FICO 10 model on Jan. 23, which will begin incorporating a person’s debt level into the model – which could mean lower credit scores.

The article said that FICO estimates that about 110 million consumers will see a change of fewer than 20 points to their score under the new credit score model. Overall, roughly 80 million consumers will see a change in score of 20 or more points up or down. According to the Wall Street Journal, people who fall behind on their loan payments are more likely to see the drop in their score first. People with recent delinquency or high use of credit will likely see their numbers fall, and depending on the severity of recent delinquency, there could be a big drop.

On the other hand, there are some credit scoring models who’ve deleted tax liens, judgments, medical collections and medical debt (the article didn’t say which ones). It may also take some time before people notice a change because banks and lenders decide which model they use. Some use VantageScore, which is produced by Experian, Equifax, and TransUnion (don’t know if or how they use HOA delinquency information).

As most of you know, most HOAs aren’t members of a credit bureau – they could apply, but membership requirements are stiff and the fees ain’t cheap (HOAs are small potatoes compared to large corporations). This is why some turn over delinquent accounts to a collection agency, who could report the delinquency to the credit bureau (unfortunately some will report it after the homeowner settles the debt). If the HOA sues the homeowner and gets a judgment or forecloses, that will eventually land on the credit history and most of you know that’s not good for the credit history either.

Moral of the story – this could be another nugget of information to pass along to homeowners as the board educates them on the importance of paying assessments in full and on time.
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