American parents pay child support for one in five youth in the US – over fifteen million kids. These payments are meant to benefit children after a divorce or separation. Unfortunately, less than half of custodial parents receive the full support they’re entitled to.
Of the $113 billion in unpaid US child support, nearly 90% is more than five years late. This means, when folks fall behind, their debts often remain unpaid. For custodial parents, this means less income to care for their kids. For folks with delinquent child support, the credit consequences can last for years.
This blog unpacks a few common questions about child support and credit. Does child support affect your credit score? What happens to your credit if you miss child support payments? Will it help your credit if you always pay child support on time?
In general, child support payments will not show up on your credit report unless you fall behind. In this case, the governing agency (such as social services) may report your arrears (unpaid child support) to the national credit bureaus. If your delinquent account goes into collections, this also will most likely show up on your credit report.
Why don’t child support agencies report to the credit bureaus? Like insurance, rent, and utilities, child support is not technically a credit exchange. You may have a financial contract, but you haven’t borrowed money from the recipient of your monthly payments.
If you skip payments or pay late, your score could take a dive. Unpaid child support may show up as an unpaid tradeline or collections account on your credit report. Both can negatively impact your credit for up to seven years, though they carry less weight over time.
Simply paying child support usually won’t improve your credit. That’s because child support agencies don’t report to the credit bureaus – even if you always pay on time. You can, however, use a third-party platform like StellarFi to turn child support and other expenses into credit-builders.
One late child support payment probably won’t show up on your credit report. But if you fall too far behind, the agency may report your unpaid child support - or arrears - to the credit bureaus. Like any delinquent account, this information can negatively affect your credit score.
Oftentimes, child support issues are the result of financial crises like job loss or unexpected medical bills. If you’re having trouble paying your child support, address the problem before you go into arrears. You can work with the co-parent to find a resolution, but you’ll have to go to court to make any official changes.
Unpaid child support can still affect your credit score once you pay it off. The derogatory mark can remain on your credit report for up to seven years, unless you work out an arrangement with the child support agency. In some cases, the agency will agree to not report to the credit agencies if you pay some or all of your outstanding support.
Child support can inadvertently affect your loan approval odds. Even if it doesn’t show up on your credit report, child support payments factor into your overall expenses and budget. Lenders consider income, debt, and expenses when evaluating loan applicants. If your financial obligations (such as child support) take up a high percentage of your income, you may have lower odds of approval.
You can only dispute inaccurate child support information on your credit report. If you have valid arrears or collections on your report, you will not be able to successfully file a dispute with the collections agency. If you settle your debt, the account holder may be willing to eliminate some or all of the negative information. Otherwise, as mentioned above, unpaid child support can remain on your credit report for up to seven years.
Unpaid child support can affect your credit score for years to come. But life happens. Emergencies and unforeseen circumstances can make monthly payments less manageable. Taking out a personal loan is one way to continue supporting your child.
The pros? You’ll stay current or get current faster. The cons? You’ll pay interest – and add another bill to your monthly expenses.
Child support loans can help you ride out minor financial road bumps. But if your money situation has changed long-term, they can stress your budget even further. Before you take out a loan, discuss potential alternatives with your co-parent and the courts. You may be able to reduce the amount you pay or decrease the amount you owe in back-pay.
The best reason to pay your child support is to give your kids the life they deserve. But what if you could use child support payments to build credit? With StellarFi, you can get more out of expenses like child support.
It’s simple: sign up and link monthly payments like rent, child support, and even Netflix. StellarFi operates behind the scenes and reports your positive payment history to all three major credit bureaus.
The bills you pay should pay you back. Become a StellarFi member today.
The StellarFi blog is intended to serve as an informational resource. While StellarFi can help you build your credit, we do not provide financial, legal, or accounting advice. Please consult a trusted advisor for financial, legal, or accounting guidance as needed.