Timeshare owners have many reasons for seeking to cancel timeshare contracts with a vacation resort or developer. For more than twelve years, we have assisted clients from different backgrounds and situations, as they attempt to untangle the financial red tape that is a binding, legal timeshare contract. And we do not think that American’s should ever have to choose between damaging their valuable, personal credit, and maintaining a financially draining contract with a timeshare company.
Whatever your reason is for seeking relief from the contractual or financial burden of timeshare ownership, one concern is common to all American’s, and that is how to protect the most asset of all; personal credit. In this article, we’ll explain how credit can be damaged when consumers deal directly with resorts and timeshare companies, and steps to help protect your credit while you are in cancel timeshare process.
How Personal Credit Rating Works
In the United States, there are three credit bureaus that are responsible for collecting and maintaining accurate consumer credit information. The bureaus are for-profit independent companies that are publicly traded, and they are not government owned (however they are regulated).
If you are interested in checking your current credit rating, the three American credit agencies are:
The three credit bureaus are regulated by the United States government to ensure that the methods of data collection (payment history, debt and income information) is secure, and that credit issues are reported in a fair manner. In the United States, any citizen can retrieve their credit score (often without a charge) and review notations or issues that may have negatively impacted their overall credit history. Federal law also provides that any errors in credit reporting (identity theft, or incorrect information) can be petitioned or corrected in writing by the consumer, to help keep the credit report and abstract accurate.
To successfully build a positive credit rating in the United States, consumers are required to:
Be a legal American citizen or permanent resident (green card holder).
Show steady income and earning ability.
Show a history of timely scheduled payment of financial obligations, including loans, service fees, utilities, mortgage, rent, vehicle, insurance and other payments.
Show consistency in meeting financial obligations without bankruptcy or financial default.
Avoid defaulting on any bill, or scheduled financial obligation. This can also include mobile phone contracts,
A consumer credit score is the sum of data collected that gives a rating as to the financial risk that an individual represents to a lender. The higher your score, the more credit options are available to you, at reasonable interest rates. A poor score dramatically impacts an individual by making personal credit more difficult to acquire (bad credit scores are often not approved by lenders), or it makes financial lending far more expensive, doubling and even tripling the interest costs compared to a borrower who has a higher credit approval rate.
What Does Not Immediately Affect Your Credit Score?
It is good to be diligent about your credit score and transactions, as it helps to both build credit and protect it from being lowered by financial errors, however, not every transaction or ‘mistake’ will immediately damage your credit history, but many people are unaware of how the credit score is acquired, built or impacted by payment history.
Age or Income
How much you earn on an annual basis has no impact on your credit score. Lower income earners can achieve a high score, based exclusively on payment history, lending habits and other positive money management behaviors over time. Your credit score is not based on how much you can ‘afford’ but rather how well you manage your money, and financial obligations. Older lenders tend to have a better-established credit rating, simply because they have more data and years of payment behavior, but it is possible for anyone to have a perfect credit rating within a five-year period, if they are actively building one with responsible borrowing.
Child Support or Alimony Payments
If you are paying child support or alimony, regular payments do not help you build, repair or establish your credit history. However, if you fall behind in support payments and a collection agency becomes involved, there can be a significant drop to your credit score (among other legal implications).
Checking Your Credit Score
There are some misconceptions about checking your credit score frequently. Did you know that people who manage their credit well, check as often as once per month, to ensure that there are no false reports on their record? Checking your credit score regularly is an important step to preventing problems, and to detect identity theft.
If you use one of the registered credit bureaus, there is no impact on your credit, no matter how many times you check. A query however by a lender, or a vendor (such as a car dealership or a bank) will count as a ‘hard query’ with the intent to borrow, and that will slightly lower your credit score, each time it is checked by a prospective lender.
Having a set overdraft on your bank account is a convenience that does not negatively impact your credit rating. However, if you are unable to meet the terms of your financial institution, and if your account remains in overdraft for an extended period and warrants action by a collection agency, there will be a negative notation on your personal credit rating.
How Timeshare Owners Damage Their Personal Credit
Individuals who are attempting to cancel their timeshare contract can be at risk, and jeopardize their favorable credit rating, depending on how they manage the process with the resort or vacation club. If you are considering the option of canceling your timeshare contract, we would like you to consider the top three ways that timeshare owners damage their credit, before seeking help from our attorney lead timeshare cancellation team.
The fastest way to acquire negative reporting to American credit bureaus is to have consistently late payments, or to refuse to pay timeshare membership or maintenance fees. We know it is frustrating when you feel like the timeshare has not delivered on their obligation to you, the customer. The first impulse that many unhappy timeshare owners have is to stop payment on all fees, and/or refuse to communicate with the timeshare. It is an understandable reaction, but one that becomes costly over time, and legally problematic for the timeshare owner.
All resorts have an administrative process that involves charging late fees, and legal correspondence with members who are in arrears for scheduled fees. Timeshare owners can expect letters that begin as ‘friendly reminders’ and then progress into more threatening correspondence, that suspends access to the timeshare and other punitive actions. During this process, most timeshare companies are not interested in reporting the problem to a credit bureau; they simply want you to resume scheduled payments.
However, if the timeshare company opts to involve a collection agency, your credit will be immediately impacted. If the collections team is unsuccessful at recouping part or all the outstanding fees and timeshare charges in arrears, that will also result in an even lower credit score, as it demonstrates an unwillingness for the consumer to rectify a financial obligation.
How Long Can a Bad Credit Report Impact Personal Lending?
If you have wondered how long it can take to restore a good credit rating, we’ve summarized some of the average notation lengths for credit bureaus. On average, a poor credit report can take seven years to be removed from your history:
Personal bankruptcy (10 years from date of filing).
Chapter 13 case personal bankruptcy (7 years from date of filing).
Tax Liens take 7 years to drop from your credit history.
Repossessions require 7 years to be removed.
Collection accounts are removed after 7 years plus 180 days after the date of delinquency from the original payment or debt amount.
Foreclosures of mortgages (and timeshares) require 7 years to be removed from the personal credit abstract.
After the personal credit score has been damaged, it becomes extremely difficult to rebuild it within the period mentioned above, until the notation expires or essentially, falls off the radar of credit reporting. Buying a house, getting a car loan, or even a new mobile phone plan, student loan or other lending can be significantly restricted by poor credit.
When you consider how long it takes to remove a negative personal credit report, it becomes even more important to know your options when it comes to timeshare cancellation. We advise our clients to avoid wasting time, money and undue risk to their credit abstract, by taking advantage of our free consultation at 1-800-587-EXIT.
Our attorney lead timeshare cancellation team will review your case for free, and provide a plan of action that can help you cancel timeshare contracts within 12-months or sooner, while guiding you through the process to help protect your credit. We’ve helped hundreds of families resolve their timeshare contract favorably, while earning financial freedom from increasing ownership costs.