Individuals in Ohio may have heard the advice to pull one's credit report frequently to see what is being reported. This is an important step in keeping a credit report accurate and credit scores high. This can also reduce the possibility that small debts that have been forgotten or that the consumer was never made aware of can sink a credit score. These debts might result in unexpected drops in a person's credit rating.
These balances might be forgotten because an individual might allow a small debt to linger while paying off larger ones. This might seem like a sensible policy because larger debts, such as substantial credit card debt might be more likely to trigger actions from collections and lawsuits. A number of things occur when a person defaults on a debt. A creditor may turn the debt over to an internal collection agency, or they might sell the debt to a third party collection agency outright. This may be done for debts that are less than $100, and when these balances are put into collection, they impact the consumer's credit score.
Adding to the problem, an individual may not even be aware of a debt in the first place. For example, a creditor may bill the wrong address and then fail to follow up with a phone call or other methods of contact. When this occurs, an individual may not learn of the debt until inopportune moments, such as when completing a mortgage application or another transaction that requires good credit.
While small debts might affect credit scores, larger balances might become subject to collection practices that drastically reduce a consumer's financial freedom. Those facing such conditions might benefit from discussing bankruptcy with an attorney. A bankruptcy filing might provide relief from collection practices, allowing for a fresh financial start for the consumer.
Source: FOX Business, " Small Debts Can Lead to Big Credit Score Problems", Erica Sandberg, July 17, 2014