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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 guide will describe the many costs of an unwanted timeshare agreement and how not paying them can affect your credit rating.

What Is a Timeshare Property

Timeshares are vacation properties following a fractional ownership model. That means several owners share the costs and fees of one unit, and in return, each retains the right to stay at the vacation property terms or a specified period each year. Timeshare developers often market toward those who want to own a vacation home but pay a fraction of the typical cost.

A timeshare purchase often equates to a one-week visit per year to your selected vacation destination. So you could be one of fifty-two different owners for your unit. However, there are several ways to use a timeshare:

  • Fixed Week Timeshare: A fixed week is a more traditional experience. Visit the exact location on the same week of the year.
  • Floating Week Timeshare: A floating week is a more adaptable experience. Visit the same location but choose a different week with each visit.
  • Points-Based Timeshare: A points-based agreement is the most flexible experience. Owners get points each year to trade in for vacation visits. They can choose from various locations and different times of the year.

The Types of Timeshares

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:

Deeded Timeshare

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.

Non-Deeded Timeshare

A non-deeded or right-to-use timeshare interest is similar to a leased 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 a foreclosure is impossible, you can still undergo credit drops through a timeshare repossession.

The Timeshare Expenses

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 Happens to My Credit if I Stop Paying for My Timeshare?

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There are many financial obligations with timeshare companies, from mortgage and property taxes to maintenance fees and utilities. You're probably curious about what happens if you fail to pay timeshare expenses. 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. If left unresolved, these collection fees can dig you deeper into debt and continue to bring down your credit score.

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 entry on the credit report and can get 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.

FREQUENTLY ASKED QUESTIONS:

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Can Timeshare Owners Get Sued For Not Paying?

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.

How Much Will My Credit Score Drop from a Timeshare Foreclosure?

The most common credit scoring models are VantageScores and FICO. How much a timeshare foreclosure can affect these scores varies. Often, a foreclosure can drop a credit score by 100 points or more. 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 to do so 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.

Bottom Line

Owning a timeshare may not affect all your forms of credit. However, not paying the expenses on time opens up the chances of your credit getting impacted. Whether the timeshare resort makes a collection effort on you or issues foreclosure action, your credit could be at risk.

If you're a timeshare owner who was unaware of these extra costs or got misled during the sales process, consider hiring an attorney or a timeshare cancellation company as an option to lift this financial hardship. You might walk away from timeshare ownership once and for good if you qualify.

Wesley Financial Group, LLC*

If you're 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 16,000 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! 

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 and not intended to substitute for professional advice, legal or otherwise.

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