Editorial Policy

Don't let bill in collections impact your credit

Erica Sandberg

April 24, 2015

QHi Erica,

I have a letter that says I am 90 days past due, and they will file a lawsuit against me if I don't pay within 15 days. It is very threatening. The bill is only for $32, and I have only just got this one bill, which I thought I paid off a long time ago. It is not on my credit reports. Maybe it is a mistake? What should I do? –Tom

ADear Tom,

Rest assured that a creditor is unlikely to sue over so small a sum. While it is possible, it's highly improbable. So try not to worry so much about that; concentrate on getting to the bottom of this situation, and doing what it takes to circumvent trouble. The debt may not be showing up on your consumer credit reports quite yet, but if you wait too long, there is a good chance it will. And if it does and remains outstanding, it will have a negative impact on your credit rating.

Because you believe you satisfied the bill, your initial action (if you haven't already done so) should be to delve into your checking account history. See if there's a cashed check in the amount in question. If you locate it, great. You'll be able to present clear evidence to the business that is contacting you, which should immediately end the pay-up-or-else correspondence.Ask Erica

Even if you can't locate proof of payment and are sure the debt is in error, you can contest it. Call the number on the letter, ask to speak with a supervisor and present your case. If you're persuasive enough, they may decide to drop the matter. If they do, request a letter from them confirming the agreement.

Back to why this mystery balance is absent, at least for now, from your credit reports. Clearly it was not for a loan or a credit card, because if it were, its detailed account history would show up in the trade lines section of your credit reports. That means it was incurred for a different type of liability, such as what you would owe to a doctor or utility company. These businesses are not lenders, so your financial activity with them lives outside the standard credit reporting realm.

However, if an amount due goes for too many months without recompense, eventually that business will remove the debt from its accounting books and may sell it to a collection agency. These third-party companies often send information about delinquent accounts to the credit reporting agencies. Notice of a collection debt will be listed on your report for seven years. Because credit scores, such as the dominant FICO, rank payment pattern as the most important factor, your scores will drop once the account is recorded.

If fighting it out doesn't produce the desired result, and you just want to end this matter, I strongly suggest that you send them the money if it is truly your debt. At that stage, you'll be done with this mess for good. Trust me, if it will waylay the credit problems a collection account causes, it will be $32 well spent.

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