How Some Divorced Parents Hurt Their Credit

When parents fall behind on their child support payments, they may be surprised to learn those delinquent payments can appear on their credit reports. What does that mean for their credit scores? A Credit.com reader asks:

I recently pulled my reports and was shocked to see the State of MO is listing my child support in arrears when it is not. I pay it regularly. Is that harming my credit?

First it’s important to understand why and how child support appears on credit reports. “Child support is generally reported as a tradeline,” says Equifax Senior Director of Public Relations Meredith Griffanti. “It is reported directly from the municipality/agency collecting the debt.”

In fact, this reporting is mandated under Title IV-D of the Social Security Act, which requires “states to report periodically to consumer reporting agencies . . . the name of any noncustodial parent who is delinquent in the payment of child support and the amount of overdue support owed by such parent.”

There are procedures in place to try to ensure that this information is accurate. Thomas DeChant, director of client and government relations for Supportkids Services Inc., a private child support collection agency in Texas, explains that the Office of the Attorney General enforces child support in his state. If a parent falls at least 45 days behind on payments, a letter will be sent notifying them that the office intends to report information to the credit bureaus and giving them 30 days to contest it.

Other states follow similar procedures. According to a fact sheet produced by the National Child Support Enforcement Association, before reporting this kind of information to credit bureaus, “states must ensure that such parents have been afforded all due process required under state law, including notice and a reasonable opportunity to contest the accuracy of such information.”

Past-due child support appears infrequently on credit reports, however. “Less than a quarter of 1% of all trades in Experian’s database are child-support related,” says Rod Griffin, Director of Public Education for Experian. But once this information is reported, parents should try to catch up. That’s because child support can be reported for seven years from the original delinquency date (the date the parent fell behind and didn’t subsequently bring the account current). If the parent continues to be behind on payments, that date of original delinquency will renew every month, explains Griffin. “That is the unique thing about delinquent child support.”

Once the child reaches the age of majority, new obligations cease and any derogatory information remains for seven years. There may be state statutes of limitations that apply as well. That means “the date of removal is calculated from whichever comes first: original delinquency date, age of majority or state statute of limitations,” Griffin says.

How to Make Sure Your Reports Are Accurate

Any parent who is paying child support would be wise to check their credit reports (here’s how to get your free annual credit reports) to make sure any information reported about these obligations to credit reporting agencies is accurate. It is also a good idea to monitor one’s credit scores, which can be done for free at Credit.com. Doing so does not affect your credit scores.

As for our reader who believes his credit report contains inaccurate information about his payment history, he should get credit reports from Equifax, Experian and TransUnion. If the information reported is inaccurate, he can dispute it with the credit reporting agencies as well as with the state agency reporting it. This guide explains how to dispute credit report mistakes.

What About Credit Scores?

While child support is typically reported when it is delinquent, resulting in a negative tradeline on the parent’s credit reports, it shouldn’t affect their credit scores. FICO reports that any items reported as child/family support obligations does not affect FICO credit scores, and the VantageScore model does not consider delinquent child support either. Of course that assumes that whatever is listed on the report is identified as a child support obligation — and that’s something parents should be sure to check for when they review their credit reports. “It could say “Department of Children Services/Atlanta/Georgia” but might not specifically say “child support” on it,” says Griffanti.

However, even if it doesn’t affect the parent’s credit scores, it could still affect their ability to get a loan such as a mortgage. Payments listed on the credit report will likely have to be included in the borrower’s debt ratio, says Scott Sheldon, senior loan officer with Sonoma County Mortgages and Credit.com contributor. “Lenders may require that parents catch up or establish a payment plan before the loan will be approved. Consumers who have judgments and/or garnishment payment liabilities should first consult with the lender and get thoroughly preapproved prior to doing any househunting,” he says.