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Pay those fines or credit score suffers
WASHINGTON (11/14/11)--Maybe you ignored a speeding ticket you got while traveling because you figured you wouldn't be back in the area soon enough for it to matter. Or maybe you simply forgot about that pesky parking ticket you got while downtown. Whatever the situation, you'd be adding to the millions of dollars in unpaid tickets that municipalities deal with every year.

Now an increasing number of cities are trying a new tactic to get violators to pay up--and if those drivers don't, their credit scores could take a major dent (TIME Nov. 3).

Many cities are sending unpaid traffic and parking tickets straight to collection agencies. If you continue to ignore a ticket once it's in a collection agency's hands, you could lose serious points from your credit score.

And a minor ticket can affect your score as much as more serious types of debt. "For scoring purposes, the credit formula doesn't make a distinction between a $25 parking ticket you got when your meter expired and an outstanding credit card debt of $25,000," according to the TIME article.

This could mean higher rates or flat-out rejection the next time you need an auto, mortgage, or other type of loan--even if your credit was formerly spotless.

"Someone with a 680 score could lose roughly 50 points from the addition of a collection of this nature," said Fair Isaac Corp. spokesperson Barry Paperno in a recent Washington Post article (Oct. 31). "For someone with a 780 score--very, very good credit--the appearance of one of these collections could lower their score by as much as 105 to 125 points."

So far, a number of large cities and their suburbs have adopted this practice. New York went this route in 2010, in an attempt to collect on $700 million in parking tickets alone. Suburbs of Washington, D.C.,  and Chicago have followed suit.

The best way to protect your credit score? Don't write off those tickets. Even if you think you can get away with not paying them, the consequences for your credit score could be much more costly in the long run.

However, if an unpaid ticket does hurt your score, you can take steps to build it back up again. To learn more, watch the "Build Your Best Credit Score" video in the Home & Family Finance Resource Center.


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