Can timeshares ruin your credit? Absolutely. That’s one of the main reasons why people keep properties that they no longer want. But does your timeshare have to affect your credit? Not if you take the appropriate measures to prevent it from happening.
Today we’ll explore four mistakes that can lead to credit score problems when you’re attempting to get out of timeshare ownership. We’ll also provide guidance on how to protect your credit and pursue a smooth timeshare exit.
There’s a right and a wrong way to approach timeshare exits, and unfortunately, many timeshare owners are forced to take the wrong route. This can happen when timeshare maintenance fees become utterly unaffordable or when your developer deliberately creates obstacles to escaping your timeshare contract, leaving you with no choice but to stop making payments on your vacation property.
Here are four ways in which your timeshare can significantly impact your credit score.
Just as with any real estate, a foreclosure on your timeshare can significantly damage your credit score. You might wonder how and why you could end up in this predicament. Here are some explanations for why timeshare foreclosures occur:
What happens when you face a timeshare foreclosure? Apart from losing access to your timeshare property and potentially owing money on a deficiency judgment, your credit score will suffer a significant decline. Foreclosures have been known to decrease credit scores by 100 to 200 points.
Furthermore, foreclosures remain on your public record, making it extremely challenging to purchase a new home. They can also indirectly lead to a bank levy if there are outstanding debts related to your foreclosed property.
The adverse impact that foreclosures have on your credit history can significantly jeopardize your chances of securing loans for future real estate purchases. It can also impair your ability to obtain credit card approvals and even hinder potential employment opportunities, as employers frequently scrutinize job applicants’ credit reports.
When you consistently make late timeshare payments, your developer may commence collection efforts to recoup any unpaid amounts. They will start to send you increasingly forceful letters, reminding you of the burdensome financial strain that you are likely attempting to forget.
Your missed payments will be reported to credit bureaus, leading to a decrease in your credit score. In certain situations, this may also result in a lawsuit where you are held accountable for both the unpaid fees and the court expenses.
When your developer gives up on pursuing your delinquent timeshare payments, they will send your bill to collections. Collection agencies have more resources to make you pay up, and their tactics include making persistent phone calls, mailing demands for payment, and offering settlement options.
Whenever a negative entry appears on your credit report from the collection agency, your credit score can drop, so this is another way a timeshare can ruin your credit history.
Here are some steps that collection agencies may take with timeshare owners who have inconsistent payment histories:
Credit utilization is how much of your credit limit you are using. It’s one of the factors that influences the “amounts owed” variable of your credit score.
If you’re using a credit card to cover timeshare costs that you can’t afford, you might end up using a large portion of your credit limit. This can lead to a high credit utilization and a lower credit score.
Aside from the direct effect that a high credit utilization can have on your credit, a high balance on your credit card may make it hard for you to make your credit card payments on time or in full. Any late payment you make on your credit card will be reported to the credit bureaus and result in a negative entry on your credit report. You’ll also likely incur a late fee from your credit card company.
And even if you’re on time, if you’re only able to make the minimum payment, interest charges will be added to your credit card balance and will start to compound. With the high interest rates on most credit cards, you may find yourself in debt and struggle to be approved for future loans or credit.
Is there any way to pursue timeshare cancellation without damaging your credit? Yes, selling or renting out your timeshare property is technically a method that won’t decrease your credit score. However, the timeshare resale market is highly saturated, with many owners giving away properties for free (or trying to) just to escape the burden of timeshare payments. Furthermore, many timeshare contracts include clauses that forbid owners from selling or renting their property.
Can timeshares ruin your credit? Yes, they can. However, there are solutions available to prevent credit damage, such as partnering with a team like Centerstone Group. Our proven method allows for a smooth termination of timeshare ownership, while minimizing the impact on your credit score — all without violating your timeshare contract.
Centerstone Group offers faster and more cost-effective services compared to other timeshare exit companies and law firms, enabling us to find resolutions for your contract more efficiently. So instead of constantly monitoring your FICO Score and falling victim to timeshare scams that promise an easy way out, reach out to Centerstone Group today for a free consultation.