In case consumers are wondering whether the foreclosure of a timeshare contract will affect their credit report, the answer is an emphatic YES. A timeshare contract is like any other formal credit contract whereby the consumer is bound by a promissory note. The funder of the timeshare contract works with the assumption that the consumer will be paying back the funds borrowed for the timeshare along with interest. In the event of a timeshare contract foreclosure the lending authorities lose out on money just as they would in case consumers foreclosed their mortgage contracts. Hence it is essential that consumers understand the ramifications of a timeshare contract foreclosure. It is important to manage a timeshare contract just as well as managing a mortgage loan for a good credit report.

Timeshare Foreclosure Sales: The Process Involved

Just as a mortgage foreclosure, timeshare foreclosure sales are also carried out at the Sheriff’s auction whereby it is sold to the highest bidder. Once the consumer wishing to foreclose his/her timeshare contract notifies the lender of their intention, the lender will obtain the timeshare contract and will present the same at the auction. Owing to the fact that the timeshare foreclosure is a public matter it is handled by the legal system and becomes a matter of public record. Consumers must be aware that the three credit agencies, Equifax, Transunion and Experian rate the clients based on the records of public courts.

Timeshare Arrears & Defaults

Arrears on a timeshare contract are the same as a default on any other consumer credit loan. The timeshare default will affect your credit score negatively. In the event that you are no longer able to afford your timeshare and are looking to foreclose your timeshare contract, the following is a likely outcome:

1. Owing to the fact that the lender will report your foreclosure, it will appear on your credit history, thereby making it very difficult for you to be able to obtain credit and even if you do it will be at a much higher rate until you rebuild your credit report.
2. Once the timeshare financial institution is sure of the foreclosure they report the mater to the IRS. This will culminate in the remainder of the timeshare contract debt being shown on your credit report along with the value of the property at the time the timeshare contract was foreclosed.

Timeshare Foreclosures: Impact on your FICO score

Owing to the fact that the timeshare contract is a matter of public record and is regarded as a court judgement, the timeshare contract foreclosure will impact your credit score negatively by 240-280 points. The timeshare foreclosure is usually visible on your credit report for a period of about 7-10 years. On close inspection companies can access this information for a period of up to 10 years thereby making credit extremely difficult to obtain. In certain situations consumers try and short-sell their timeshare contracts. This too negatively impacts your credit score and puts it back by anywhere between 80-120 points and is visible on your credit report for a period of at least 7 years.

Consumers should be aware that like all consumer credit contracts timeshare credit contracts are to be taken seriously. Blemishes on timeshare contracts like all others have a direct negative impact on your credit score. Remember it is prudent to only get that debt which consumers know they can afford and are comfortable paying off. In a strict credit environment where we are experiencing credit contraction like never before it might be wise to ensure that you do everything possible to maintain and improve a good and healthy credit report.

Reference:

1. Timeshare Foreclosures and Your Credit Score – RCI VIP