Payment delinquency is a common problem for most community associations, and they probably always will be. As an HOA board member, you know too well how the habitual delinquencies can turn into other major problems for associations. The non-payments and late payments of HOA and condo dues can be reported to the credit bureaus like how mortgages, loans and credit cards are reported.
Here are six reasons why HOA boards should report HOA dues to the credit bureaus:
- Stronger Leverage Over Delinquent Payers
- Reduce Delinquencies and Maintain Positive Payment Habits
- Maintain Property Value
- Save Cost and Time Chasing Payments
- Avoid Special Assessments
- Boost Homeowners’ Credit Scores
1.Stronger leverage over delinquent payers. If a property owner fails to pay their assessment, the HOA’s first step is usually to attempt a friendly collection. If that doesn’t work, the association can use its legal rights to foreclose and collect on delinquencies.
Reporting assessment payments to the credit bureaus gives you more leverage. The potential impact to their credit scores would drive homeowners to prioritize HOA assessments even before their account becomes delinquent – they can get a boost in their scores if their on-time payments are reported and if they maintain their positive payment habit; or get a reduction in credit score if they do the opposite.
2. Reduce delinquencies and maintain positive payment. Reporting has proven to maintain positive payment habits and correct negative behavior. Sperlonga’s clients typically see a decrease in delinquencies of 30% in the first 6-12 months of reporting. If your association doesn’t have issues with delinquency, credit reporting can help you ensure that good payment behavior will continue.
3. Maintain property Value. If the homeowner association is not able to collect all the dues, it would difficult to keep the upkeep of the property. This could negatively affect the property’s value and resale potential down the road. An unkept community would also find it hard to attract quality, new homeowners.
4. Save time and cost chasing payments. When the HOA board no longer needs to chase after delinquent accounts, the board and the association could have more time and resources to focus on other important and value-adding association matters.
5. Avoid special assessments. When the association gets to a budget deficit due to some homeowners defaulting on their monthly dues, they would need to charge other homeowners a special assessment to fund necessary property upkeep. The other homeowners could find this unfair and could result to community unrest.
6. Boost homeowners’ credit scores. When your association reports on-time payments, this could further boost your homeowners’ credit scores so they could get better financial options. This would be an amenity your homeowners would be happy about and a differentiating your property could offer potential homeowners.
Reporting HOA dues to credit bureaus like TransUnion and Equifax is a great solution that could make your collection efforts more proactive before dues become even delinquent. It elevates the HOA dues obligation to equal importance as the mortgage, auto loan or other consumer loan payment obligation.
If you are still wondering why HOA boards should report HOA due to the credit bureaus, schedule a free consultation with one of credit reporting experts. See how easy credit reporting is with Sperlonga.