How an Unpaid Traffic Ticket Can Wreck Your Credit Score

Parking Tickets and Credit ScoresSo you have an unpaid traffic ticket. That’s not the crime of the century. But based on an article I read this week in the Washington Post, it could have significant ramifications for your credit score. And yes, it could cost you $65,738 or more in extra interest payments. Here’s the deal.

Ashley Halsey III reported in the Post that city governments are turning to a new revenue source–collecting unpaid parking and traffic tickets. The District of Columbia, for example, has $355 million in unpaid fines. And that pales in comparison to the $680 million New York City is owed ($58 million in Milwaukee, $30 million in Detroit, and the list goes on). Many of these municipalities are turning these unpaid tickets over to collection agencies.

And here’s the kicker. If you fail to pay, the collection agencies will report the unpaid fine to the credit bureaus.

Now at first you might be thinking that an unpaid fine of $50 or $100 won’t have much impact on your score. Think again. According to Barry Paperno of Fair Isaac Corp. (a/k/a FICO), someone with a credit score of 680 could lose about 50 points. And it gets worse. Someone with a good credit score of 780 could drop as many as 125 points.

To put those numbers in perspective, let’s look at how a score of 780 versus 655 would affect your mortgage rates. As I’ve written before, your credit score has a big impact on mortgage rates. And according to a really handy calculator from MyFICO, a credit score of 780 nets you a rate of 3.68% APR while 655 raises the rate to 4.723%. On a $300,000 mortgage for 30 years, this seemingly small increase in the rate will cost you $65,738 (click the image to enlarge):

Credit Score and Mortgage Rates

So what’s the moral of this story? Pay your parking tickets!

(Photo Credit: rknickme)

Published or Updated: November 2, 2011
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. Penny says:

    It never would have occurred to me to worry about that, but it makes sense. If you break a law, you have to deal with the consequences. If you aren’t willing to pay your parking ticket why would a lender assume you will pay them? I’ve never had a parking ticket, but if I ever do get one I’ll be sure to pay it off right away.

  2. mark magula says:

    Penny your nuts….the FICO rating system is a gigantic consumer rip off perpetuated by the banks and including a parking violation in the mix is pure insanity.

    Write to your senator we need legislation to prevent that kind of lunacy it’s bad enough that every tom dick and harry can jump on the “Credit Score, Identity protection etc money train at our expense. If they don’t have the common sense to separate a parking violation for $50 from a debt obligation that and adult agrees to pay then someone needs to tell them what they can and cannot do. One more issue for Obama to address in 2013!

  3. Scott says:

    Penny you probably don’t live in a major city or at least you don’t drive downtown. Parking tickets are handed out like candy as a revenue generator for major cities. My score has been killed by two parking tickets I never saw. As cities outsource parking ticket writing to private companies pressure is put on the meter maids to meet quotas and in turn tickets are placed on cars at a high rate and some are fraudulent. I’m in the middle of a refi and I’m being butchered. My score went from a 801 to a 665.

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