Many communities have a homeowners' association, or HOA, that manages the common grounds and notifies residents who are in violation of the community rules and regulations. Although those serving on the HOA board are usually volunteers, homeowners pay monthly dues to cover taxes, maintenance and improvement of the common areas. This payment is separate from your mortgage, but still a legal obligation. Some owners worry that an HOA lien will affect their credit score.
An HOA lien will negatively affect your credit score, and the extent of the damage depends on how long the HOA has been reporting your account as unpaid.
Evaluating Credit Bureaus
Originally, credit bureaus recorded late payments on consumer loans, mortgages and credit cards. Other debts, such as past due medical or utility bills, did not affect your credit rating. However, the rules have changed and now credit reports reflect every form of credit, including unpaid homeowner association bills.
Homeowner Association Dues
You may have hefty homeowner association dues if you live in a condominium or housing development that has many amenities or in need of expensive repairs. When you fall behind in paying your dues, the HOA makes a demand for payment. If you ignore that demand, then they may choose to place a lien against the property.
HOA Property Lien
Your homeowners association records the lien against your property at the county clerk’s office. Additionally, once the clerk records the lien, your HOA may choose to place the lien on your credit report at the three leading bureaus: Experian, Equifax and TransUnion.
Your Credit Score
All negative information, including the HOA lien, affects your credit score. The extent of credit score damage depends on whether the homeowners association had been reporting your account as unpaid for several months before placing the lien. If they have dinged your credit every month, then the credit bureau will lower your score significantly more than if the actual lien were the first negative information recorded. The HOA lien stays on your credit report for seven years.
If your HOA pursues foreclosure after placing the lien, it would force your first mortgage holder to also file foreclosure. This will lower your credit score even further, with repercussions in other areas of your life.
Work with Your HOA
Before your HOA presses legal action against you, try to work out a payment arrangement. If the HOA attorney becomes involved in the process, you may end up owing legal fees on top of past dues, a possible ding on your credit report and, in a worst-case scenario, a foreclosure filing.
- Homeowners Protection Bureau: 12 Facts About HOA Liens & Foreclosures
- Credit: Could Your HOA Wreck Your Credit?
- Nolo: How Much Will an HOA Foreclosure Hurt My Credit Score?
- Internal Revenue Service. "Understanding a Federal Tax Lien." Accessed Sep. 18, 2020.
- Experian. "Tax Liens Are No Longer a Part of Credit Reports." Accessed Sept. 18, 2020.
- Experian. "What Affects Your Credit Scores?" Accessed Sep. 18, 2020.
- Federal Trade Commission. "Fair Credit Reporting Act 15 U.S.C § 1681," Page 22. Accessed Sep. 18, 2020.
Diane Perez is a writer who contributes to various websites, specializing in gardening and business topics, and creates sales copy for private clients. Perez holds a Bachelor of Science in education from the University of Miami.