So you racked up another parking ticket. No big deal. We all get them, but you better pay up. It seems cities are getting down right serious about collecting their money.
With municipal budgets suffocating in red ink, cities are turning to collection agencies to recoup money from unpaid traffic and parking tickets. New York City, for instance, has nearly $700 million in outstanding traffic tickets.
But in the age of the all important credit score, collection agencies now wield unprecedented power. If you fail to respond, collection agencies can report your unpaid parking tickets to the nation’s credit scoring agencies, causing your credit score to plummet.
On your credit report, an unpaid $125 traffic ticket looks just as bad as a delinquent $5000 credit card account.
Barry Paperno, spokesman for the credit service company Fair Isaac (FICO), warned in a recent Washington Post article:
“Someone with a 680 [credit] score could lose roughly 50 points from the addition of a collection of this nature …. For someone with a 780 score “” very, very good credit “” the appearance of one of these collections could lower their score by as much as 105 to 125 points.”
A 50 to 125 point drop could cost you dearly, making it more difficult to get a car loan or mortgage. And even if you do obtain a loan, the interest rate would be significantly higher the lower your credit score.
Yet, credit scores are not only used to decide the interest rate of consumer loans. Increasingly, they’re being used to determine the rate you’ll pay for insurance, whether or not you can rent an apartment, and even if you’ll be hired for certain jobs.
But it’s not just traffic and parking tickets that can get you in trouble. Surprisingly, something as simple as a library fine could blemish your credit report. Increasingly municipalities are handing overdue library fines to collection agencies as well.
There’s even a collection agency that specializes in tracking down overdue library books and late fees. Unique Management Services currently works with over 1400 libraries to retrieve unreturned books and collect fines. If customers don’t pay up, their delinquent accounts are reported to the nation’s credit scoring agencies.
The Take Home Lesson: Take your traffic citations, parking tickets, and library fines seriously. Keep track of your tickets and either dispute them or pay them promptly. No longer can you dismiss tickets you obtained traveling to other cities or states. An ignored out-of-town ticket could come back to blemish your credit report. And remember to keep track of your books. Your kid’s Lost Curious George title could cause you to pay more for your automobile loan or mortgage.
BMWK, have you ever had a traffic ticket or overdue library bill sent to a collection agency? Do you think its fair that an unpaid library fine or traffic ticket could end up on your credit report?