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Small debts may adversely affect a credit rating

Credit reports carry information to potential lenders about how individuals pay their bills. Whether a bill is large or small, as some Arizona residents may know, it matters. Almost 200,000 Americans have marks on their credit report for amounts less than $100.

A credit rating may be affected the first time a credit card payment is late. Others only show up when they are turned over to collection. The collection agency may report the delinquency to one or sometimes all three credit bureaus. The question remains why so many Americans have small unpaid bills that end up in collections. One answer may be they forget about them, or they labor under the erroneous belief that the bigger bills are more important and will have a much greater effect on credit.

Sometimes, the small debts that are ignored make their existence known at the worst possible time. When applying for a mortgage, the credit score that was once high has fallen exponentially due to a few unpaid bills under $100. The newer the debt or the newer the collection action, the more effect it has on a credit score.

In order to eliminate credit score surprises, it is best to check scores at regular intervals. If an error exists, it is best to be polite but fight it. If it becomes apparent that misinformation will not be tolerated, the error will often be corrected. Sometimes it is difficult to deal with debt financially. In those instances, it may be beneficial to speak with an attorney who can answer questions about rectifying bad information and give insight into whether bankruptcy may be a prudent choice.

Source: FOX Business, "Small Debts Can Lead to Big Credit Score Problems", Erica Sandberg, July 17, 2014

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  • NACA | National Association of Consumer Advocates
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