When it comes to your credit, there are several factors that may affect your credibility. Child support for one has a big impact. Keep in mind that child support issues will always be a part of your income until your children reaches legal age. If you’re planning to apply for a loan or you already have a credit line, you must always take into consideration your ability to support your child. The very main reason is that child support and credit will always be incorporated with one another. Delinquent child support comes with serious consequences.
Overview of credit score
By definition, a credit score is a statistical analysis of an individual’s credit reports. Its primary role is to ensure bank and lending institutions of your capabilities to repay your debts. Under this report, they will base what interest rate to apply and how much your credit limit would be. Having an impeccable credit score would be a good help for you.
Banks and lending institutions are not only the ones who base their lender’s capabilities with credit score. Other companies such as telephone companies, insurance companies and government departments rely on credit score to evaluate your competence to pay your obligations. As you can observe, almost everyone rely on credit.
From buying a house to their phone bills, one must present a credit report. Maintaining a reputable credit report would not only allow you to loan, it will also provide financial aid when needed.
Understanding how credit report works
For you to fully manage your credit and credit report, one must understand the underlying details of how credit report is computed. Basically, credit report is like a grading sheet. There are certain percentages allotted to a specific category. Once each category is computed, the total score would range from 350 to 850.
For the breakdown of your credit report, 35% of it is based on your payment history. In this, your score will vary depending on how many late payments you have acquired and if bankruptcy has been filed. Recent delinquent payment will result to higher damage or worsen your overall score. Another 30% is based on your current debt. This will inform lending institutions on how much credit you have already accumulated. From car loans to credit cards, all of it will be tallied.
The next is 15% that is based on the length of time that you are on a credit. The longer the length of your credit the better your score will be. This is because with longer time, your credit report will also be full of data to compare. Next is 10% that is based on new credits made.
Recently opened credit account would result to negative impact for you. Lastly, another 10% is based on the type of credit you currently have. This will aid in raising your score by showing your ability and experience to pay your debt from all sorts of credit types.
How child support affects your credit?
As mentioned above, child support and credit is very much incorporated. Child support is like your personal debt to your children. It will be computed as a current credit for you. Maintaining a child support is manageable as long as you take your responsibilities into serious matter. However, if you missed even a single payment it will hold you consequences.
For one, delinquent child support will last in your credit report for at least 7 years. As simple as it sounds, your credibility will be greatly affected with this. As high as 20 to 30 points will be deducted in the total score of your credit report. As a general rule, all unpaid child support will be reported on the 3 major national credit bureaus.
Second, even if one declares bankruptcy, obligations for child support will remain. There is no way out of you obligations once the court orders you to provide it. As long as you have child support obligations, you income would be subjected to debt to income proportion.
As you can see, child support and credit score will always be a matter of great consideration when filling for a new loan. Though today, credit is the number one source of financial aid. One must avoid any circumstances that would result to any form of credit. Especially in situations that you are under a court order to pay for child support.
With this, try to prioritize you children first before your wants. It may seem unjustifiable for some but these things must be done. It’s a child’s life at stake and you as a parent have every responsibility to nurture and bring your kid a brighter future.
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