Small bad debt is still bad debt on a credit report

As many Illinois residents may know, forgotten debt may pop up on a credit report at the worst possible time. Being alert to this possibility and avoiding it may make getting a mortgage or a car loan easier.

In one example, a California woman charged about $100 at a local department store. The address that the clerk used for billing was wrong, and no attempt to contact the woman about the debt was made even though she tried to fix the address issue. When the woman went overseas, the store went into bankruptcy, and its uncollected debt was sent to a collection agency. When the woman returned to the U.S. and applied for a mortgage, she found that the debt had been reported to the credit bureau.

Small medical debt is common. One Florida man's credit report listed a lab bill as uncollected. It started when he went to an emergency room, and since laboratory bills are often charged separately, he was unaware of the lab bill when he paid for the emergency room visit. The bill was sent to an invalid address, and no further attempt to contact him was made. The $23 bill was sent to collections.

In these cases, small debts caused big problems. Because the debts are small, companies sometimes fail to do more than report the problem to credit reporting agencies. However, checking their credit reports regularly may help consumers avoid lower credit scores. An attorney may also provide options that are available to a consumer who is facing a credit issue caused by an unpaid debt. If the consumer cannot resolve the debt through payments, the attorney might provide insight into the type of bankruptcy that they may use to eliminate it.

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

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