Ohio residents may be interested to learn about how small debts can lead to big drops in their credit scores. Although many people believe that a debt under $100 may not affect a credit score very much, if it gets reported, it could actually end up lowering one’s overall credit score regardless of how small it is. One mortgage lender commented that she noticed firsthand how a $65 medical bill lowered a man’s credit score by 50 points.
According to a spokesman for the Association of Credit and Collection Professionals, even a $3 late charge at a movie store could be detrimental for someone trying to eliminate debt. He also commented that once a small debt is reported, a person’s credit score could go from 750 to a 550 “in milliseconds.” Although not every minuscule debt will show up on a credit score, a surprising number of them do.
When the debt gets reported, the effects of letting a small bill go unpaid can be expensive. One woman who used her credit card to charge about $100 at a department store never ended up paying the debt because of a mistake with her address. When she went to buy a house years later, the woman was forced to accept a more expensive mortgage because of the damage to her credit.
Some individuals with a low credit score have more than just an accumulation of small debts on their credit history. For some, an overwhelming amount of large debts may seem almost impossible to overcome. In some cases, filing for bankruptcy can be the best solution to get out of debt and start from a clean slate. A bankruptcy lawyer could help individuals looking to make a fresh start evaluate their options and select a course of action that best suits their financial situation.
Source: FOX Business, “Small Debts Can Lead to Big Credit Score Problems”, Erica Sandberg, July 17, 2014