Can Timeshare Ruin Your Credit

Written by: Chuck McDowell Updated: Jan 24, 2024 Published: Apr 25, 2022 6 minute read

Will Not Paying Timeshare Affect My Credit

Owning a timeshare may seem significant at first, but once you realize how expensive it is for the consumer, you may change your mind. Many fees are associated with timeshare ownership, some of which buyers overlook. This article will describe the many costs of an unwanted timeshare agreement and how not paying them can have the ability to affect your credit rating.

Does Timeshare Go On Your Credit Report?

Regarding credit reports, most resorts do not provide credit bureaus with an owner's payment history unless they fall behind or face foreclosure. Therefore, unlike a mortgage or car loan payment, paying off a timeshare each month might not help to improve credit scores. So, while the timeshare developer might give off the impression that their vacation properties are like all other real estate forms, that is not always the case. 

Despite credit ratings not being awarded for on-time payments, resort companies are often quick to report overdue payments or maintenance or loans. These types of cases can lead to negative consequences for one's credit.

Does the Type of Timeshare Ownership Affect Credit Scores?

Timeshares are a form of real estate property and should warrant caution to your credit. How it can affect a credit score depends on the type of ownership. The two common vacation ownership interests within the timeshare industry include the following:

Deeded Timeshares

A deeded timeshare interest means your share of the resort unit is considered real property. That implies you possess the property's title deed. You make a lifetime commitment when you purchase a deeded timeshare, as it's often written perpetually. Credit damage and foreclosure are always risks for an indefinite timeshare obligation.

Right-to-Use Timeshares

A non-deeded or right-to-use timeshare interest is similar to a lease agreement. Rather than real property, non-deeded timeshares are personal property–meaning you can use it, but you don't own it. The resort developer might retain the title deed. Thus, while foreclosure is impossible, you can still undergo credit drops through a timeshare repossession.

What Happens To Your Credit If You Stop Paying Your Timeshare?

There are many monetary obligations with timeshares, from mortgage and property taxes to maintenance fees and utilities, and failing to pay them can result in financial ruin. Timeshare companies recoup unpaid debt in two ways, and neither is suitable for your credit.

Late Or Missed Payment Fees

Your timeshare resort developer will not waste time if you miss a payment. Granted, some companies may be more lenient while others are demanding. Nonetheless, your resort will reach out by phone call or letter to collect payments and issue late fees. And if it remains unpaid, you may get reported to a third-party collection agency.

When collection agencies are involved, expect them to insistently leave many messages per week for payments while also adding to your debt situation with additional fees. These collection actions are also negative entries reported to credit bureaus. These collection fees can dig you deeper into debt and reduce your credit score if left unresolved.

Timeshare Foreclosure

Owners who fail or refuse to pay their expenses could face foreclosure. Timeshare foreclosures proceed like other residential foreclosures. Depending on the state, it will be either a judicial or nonjudicial process that gets your property sold to the highest bidder at a foreclosure sale.

So, how can a timeshare foreclosure affect credit scores? Again, like a residential foreclosure. They appear as a negative credit report entry and can be reported to a credit bureau. A foreclosure is a public record, and credit reporting agencies often search such records. Your credit score will reap the burden unless resolved quickly.

FAQs

How Much Will My Credit Score Drop From A Timeshare Foreclosure?

Often, a timeshare foreclosure can drop a credit score by 100 points or more. The effects of foreclosure vary by the credit scoring model (VantageScore or FICO). Also, those with higher scores before the process will see the most significant impact.

How Long Will A Timeshare Foreclosure Stay On My Credit Report?

Timeshare foreclosures not only hurt your current type of credit score but can continue for years to come. A timeshare foreclosure can remain on your credit history for up to seven years. You're likely to face future denials for new credit, such as car loan providers or credit card companies during that time, or at least those without high-interest rates.

Can Timeshare Owners Get Sued For Unpaid Fees?

When refusing to pay timeshare expenses, the resort company can decide to sue you in civil court for past-due balances. Depending on the judgment, the timeshare management company may be able to garnish your wages or request a bank levy be placed to collect the debt owed.

What Are the Costs Associated With Timeshares?

There is more to it than the listing price when buying a timeshare. Many costs and hidden fees go into a purchase. To get an idea of the financial obligations, below is a list of standard timeshare expenses:

  • Purchase Price and Interest Fees: Timeshare buyers can pay upfront, but many require a loan for the purchase. Timeshare loan payments must be regularly paid, just like a home mortgage. You also have to account for your timeshare mortgage payments and interest rate, which can be lofty.
  • Annual Maintenance Fee: These fees cover cleaning, landscaping, security, amenities, etc. Timeshare maintenance fees are often assessed annually and are due whether or not you use the property that year. The average cost is already $1,000 and increasing.
  • Special Assessments: A special assessment covers one-time costs for specific repairs or significant improvements to the property. These fees can cover anything from new roofing to new tennis courts. Assessment fees are mandatory.
  • Utilities: Indeed, timeshare owners are responsible for paying the utility costs of their visit. Considering the many resorts with tropical beaches and snowy mountains, timeshare utilities such as heating and air conditioning can get expensive.
  • Taxes: Property taxes and additional resort taxes may get assessed when you stay at the timeshare. Learn more about writing off your timeshare here, but the best way to determine eligibility is to consult with a tax professional.

What Are the Advantages of Owning a Timeshare?

Timeshares are not always without benefits. For many, this type of vacation ownership allows individuals and families to enjoy a consistent amount of vacation time. Those who despise scheduling and planning trips each year may find that owning a timeshare can simplify the process. Some timeshare owners enjoy the stress-free approach of having a specific place and a week already reserved for future vacations. 

Other benefits may include having a multitude of destinations available to choose from and also not being physically responsible for labor-intensive maintenance.

What Are the Disadvantages of Owning a Timeshare?  

Owning a timeshare can be a great way to enjoy a vacation property without full ownership, but it has some drawbacks. One of the most significant disadvantages of owning a timeshare is the cost. Timeshare properties are typically more expensive than traditional vacation rentals, and the cost of the timeshare can be a major financial burden for many people. 

In addition to the initial cost of the timeshare, maintenance fees, and taxes must be paid, which can add up significantly over time. These fees are usually due on an annual basis and can range anywhere from a few hundred to a few thousand dollars, depending on the size and location of the timeshare. In addition to the annual fees, there are also others.

How to Get Rid of a Timeshare Without Damaging Your Credit?

Having a timeshare may not have an impact on every form of credit. Yet, not settling the payments punctually raises the prospect of your credit being affected. Whether the timeshare resort seeks compensation from you or carries out foreclosure activity, your credit score could be in jeopardy.

Timeshare owners who are unaware of these additional expenses or were deceived during the sales presentation should consider an exit plan that will not hurt their credit. See below for such options:

  • Rescind the Purchase: Nearly all 50 states now have timeshare rescission laws that provide buyers with a brief cooling-off period following their purchase. 
  • Ask the Property Developer: After the rescission period expires, consider working out a deal with the timeshare company, as some offer buy-back programs.
  • Rent the Timeshare: Many deeded timeshare owners have the option to rent out their unit if they do not plan on using it during their annual reservations, which can help cover some of the expenses. 
  • Resell the Timeshare: The secondary market is a hotbed for unhappy timeshare owners looking for a way out. However, it comes with the risk of encountering scam artists masquerading as resellers.  
  • Hire a Timeshare Exit Company: If all else fails, consider working with a reputable and trusted cancellation company. These establishments assist those who were misled or deceived into a timeshare purchase. 

Wesley Financial Group, LLC*

If hiring a timeshare cancellation company, don't look further than Wesley Financial Group, LLC (WFG).* A world-class timeshare exit company focused on helping innocent people who were lied to by timeshare salespeople. WFG has the numbers to prove it too. Since 2011, they have canceled over 30,000 timeshares and eliminated $300,000,000 of timeshare mortgage debt. 

Schedule a free consultation with WFG representatives today to plan your best course of action! 

schedule a free consultation with wesley financial group


*Wesley Financial Group, LLC, and its affiliates, successors, or assigns are not lawyers or a law firm and do not engage in the practice of law or provide legal advice or legal representation. All information, software, services, and comments provided on this site are for informational and self-help purposes only and not intended to substitute for professional advice, legal or otherwise.

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