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Hi Erica,
Can you tell me how speeding tickets look on a credit file and what they do to my FICO scores? I owe about $900. I have no other debt except for my car loan, which is at about $10,000. So I think I have been doing pretty well. I’m afraid these tickets will ruin everything, though. How bad will the tickets be? – Belle
Dear Belle,
Slow down, ma’am. You may be able to relax, since the only way speeding tickets will find their way on to your consumer credit reports is if you do not pay them when you should. Unlike with your auto loan, you didn’t borrow money from a financial institution for those fines (you just drove too fast). When such tickets are in “current” status, they’re considered bills, not debts. Think of them like the account statement you get from a doctor. When the bill or fine is in good standing, your credit is safe.
However, like the doctor’s bills, ignore such speeding tickets and other legal fines at your peril. If you fail to send the money by the deadline, most municipalities will hire collection agencies to get you to cough up the cash. And if that happens, you most certainly will experience credit damage. The collector will report the unpaid sum to all three credit bureaus — TransUnion, Experian and Equifax. Then FICO will step in and use the information listed on those reports to generate a credit score. At that stage, you can watch your numbers fall dramatically.
In fact, the only thing that can drag FICO scores down lower and faster than accounts in collections is a bankruptcy in your report. An account that’s been sent or sold to a collector can immediately reduce it by 100 points, and sometimes more. It doesn’t even matter how much you owe. All accounts in collections are factored into the scoring formula the same way. Therefore, a $900 fine that’s gone bad is weighed as heavily as a $9,000 credit card charge-off.
Besides the effect on your credit rating, you’ll also have to think about what it’s like to deal with the people whose business it is to get you to pay up. Dealing with collection agencies is often highly unpleasant. They are permitted to call every day (and usually do) and can be quite scary. This should come as no surprise. Being mean can be an effective way to scare debtors into coughing up some cash.
If you don’t pay the bill, the collector can take legal action, too. Will they do so if you owe only a small sum? Maybe. It’s their right and, if they choose to exercise it, they may. You will never want the situation to take such a downward spiral. If they sue you, you will almost certainly lose. The debt will increase because interest, court costs, legal fees and so on will be added to the balance.
At that point, not only will you owe a lot more than you did originally, but the judgment creditor may be able to take other action, such as attack your wages so that a portion of your pay goes toward the debt until it’s paid in full. Oh, and the judgment will be listed on your credit report. Oh, and they can collect for as long as the law allows, which can be for decades.
See where I’m going? Pay the speeding tickets before your credit crashes.
