Even a small debt in collection can hurt your credit score.

Of the 35.1% of American consumers with collection bureau delinquencies, a full 10% of these debtors owe less than $175. Those old cell phone contracts, forgotten medical lab bills, and cancelled gym membership charges can cost you thousands in increased interest expenses. What’s more, you may also find that you pay much more in car insurance premiums and borrowing costs as a result.

Even a small amount of debt placed for collection can cut your credit rating by 20–100 points. As a matter of fact, those with better credit scores will experience larger reductions in their credit scores, according to an article on the credit.com blog. The author’s research indicates that the report of your first late payment on your credit report might drop you from excellent credit (740 points) to mediocre (640 points). Collections agencies sometimes single out debtors with better credit ratings to focus their collection efforts on because those debtors are more likely to pay overdue bills faster than debtors with poor credit, according to the credit.com blog.

Get a Free Annual Credit Checkup

It’s a good practice to check your credit reports for free once a year at Annualcreditreport.com to determine whether your credit report has any forgotten debts listed on one or more of the three credit bureaus.

What should you do when you find a small negative item on a credit bureau history?

Make a choice. Pay it or dispute it.

First, take a look at your financial picture. Are you carrying high credit card balances on revolving accounts? Are other bills overwhelming you?

If you feel as though you cannot escape financial pressures that seem overwhelming, then a bankruptcy filing could be the right solution for you and your family to help you get a fresh start on a brighter financial future.

• If you are a higher earner, filing a Chapter 13 case might allow you to retire debts with 36 easy payments.
• If you are a lower earner, or if you have a large household size, then you might be able to wipe away all the debts at once by filing Chapter 7 bankruptcy.

With the amendments to the bankruptcy code that took effect in 2005, many high earners can breeze through a Chapter 7 case even though the stated purpose of those amendments was to make qualification to file Chapter 7 bankruptcy “tougher”.

Act Now to Make Your Financial Future a Bright One

Contact us to make an appointment at one of our convenient locations. We can help; our customer reviews show how hard we have worked for clients in many difficult circumstances. It’s never too late to take charge of your life and to make the right decision for you and your family.