4/23/2012 6:08 PM ET|
How $5 ruined my credit score
Even a small bill can hammer your credit rating if it goes to collections. Fortunately, there are ways to protect yourself.
CardRatings.com asked readers to tell us how they helped or hurt their credit scores. This story from reader Melinda Graham of York, Pa., shows how a little bill can cost you big money.
"In the fall of 2008, I got a flu shot at my doctor's office. A few weeks later, I got billed $5 for my co-pay on a 'blood draw' on that date. I procrastinated a bit on calling in to ask my doctor's office to fix what was probably just a miscoded procedure. Eventually I called and went through the usual ordeal of explaining the situation to person after person before finding the one who said they could take care of it.
"In the fall of 2009, I got a notice from a collection agency that my doctor's office had turned over a $5 unpaid bill for collection. I racked my brain for another bill that might have fallen through the cracks and couldn't come up with anything but the co-pay. So, there I was, looking at this collection notice and remembering the time spent on the phone the first time around, and I decided $5 wasn't worth the hassle. I mailed a check to the collection agency.
"Fast-forward a few months, when my fiancé and I decided to really get into discussing our finances in preparation for merging them after we got married. I told him about AnnualCreditReport.com, and how I like to review my credit report every few months. I hadn't checked it in a while, so we thought we should get our reports and pay for credit scores, too. And then I nearly fell off my chair when I saw that because the $5 medical bill had been reported by the collection agency, my score had dropped from 785 to 689! I was shocked: $5 = 96 points?! Boy, did I ever regret my decision to avoid the minor hassle of a phone call to straighten out the billing error.
"Subsequently, I did contact the doctor's billing office and got it all straightened out. They also notified the collection agency of the billing error and had that entry removed from my credit report with the credit bureaus. Unfortunately, my score only went back up to 764.
"No more collection agencies for me!"
Here's what every consumer should do to protect or improve a credit score:
- Pay all bills on time, and keep your credit usage low. To improve your score, try to use only 1% to 10% of your available credit line.
- Check credit reports regularly. Federal law allows you to get a free report once a year from each of the credit-reporting agencies -- Equifax, Experian and TransUnion. Log on to AnnualCreditReport.com to order or download yours.
- Fix mistakes on your credit report. While lenders and credit card issuers report your activity to the credit bureaus, you are responsible for the accuracy of your credit report. Errors can be as simple as a wrong name or address or as complex as a line of credit that has been opened in your name, meaning you may be the victim of identity theft. Follow these six steps to fix errors on your credit reports.
- Pay for your credit scores. If you anticipate applying for a loan such as a mortgage, you should get your credit scores a few months in advance so you can work on raising them. The higher your scores, the lower your interest rate will be. You may also want to subscribe to a credit-monitoring service, which will give you access to your scores on a regular basis. Knowing how much your scores go up or down based on your financial behavior may help you improve your money-management skills. Also, keeping an eye on your credit report and scores means you can jump on a problem before it gets out of hand and destroys your credit.
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Thieving bank shills like the credit reporting agencies Equifax, Trans Union and Experian can take their godamn scores and reporting fees and stick them where the sun doesn't shine for all I care. At my age, I'm not about to apply for any more new car loans, mortgages, credit cards or anything else I don't need, so they can shove it. The only reason that these companies are able to hold people hostage is because our crooked bought-and-paid-for Senators and Congressmen were bought off long ago. The entire thing was a scheme by the big banks to allow the creation and the expansion of this insidious and overbearing credit rating system that now rides herd on the American people. I don't give a rat's a** if my 'score' is minus 700... they can go piss up a rope. I really feel sorry for young families today trying to get even an inch ahead, it's nearly impossible and unfortunately they are quite f***ed as the poor bastards have another 40 or 50 years of this bulls**t ahead of them.
shouldn't this be mandated by federal law?
It's really quite easy to fix this mess. Make the credit reporting agencies responsible for the accuracy of the information they sell and with that, allow people who have tried to get errors fixed to file suit in small claims courts when the agencies don't respond or correct things.
The agencies sell the information, why are they not responsible for what they sell?
Every other person or organization in the world is responsible for information they provide either legally or through the civil court system for the informations accuracy.
You get nothing but my middle finger. May you be infested with flesh-eating bacteria.
According to the credit bureaus, I've been accused of bankruptcy,......twice (I've never filed bankruptcy), I've been accused of being my father (I am not my father), and I've even been accused of being dead (I am not dead). And because of these errors that were created by the credit bureaus, I'm the one that suffered the consequences and I am the one that had to get it straightened out. This took months.
Credit reporting is an inept system to say the least and yes, it is the consumer who suffers.
I had the same problem as almost everyone else on this post.
My house is valued at $325,000. I owe $195,000. interest rate 5.75%.
I tried to refinance my house to get a lower interest rate, did some shopping around for the best offer. Bad idea. Big mistake. Each time I called they had to run a credit check. Was told that it would not affect my score. Started with a score of 765. Second check 765. Third check 760. I asked why it was different then the first. Was told that 5 points is no big deal. Then came the shocker. The first company I checked startedwith had the best deal. I called them back and they said that they would need to do another check. Because it had be a couple of days. New score 695. Lost 70 point by shopping around. Was told that even though I had over $130,000 in equity It would be best not to do anything because the best they could offer was 5.25%. Was not worth the cost nor the trouble to refinance.
And no one in the GOVERNMENT is checking on the accuracy of the SCORE. Is it just a made up number?
Let’s see... Not one but three third party companies collect information on me. None of it is verified by me. It's distributed to anyone who is willing to pay for it. Somehow it's my responsibility to check its veracity and jump through hoops for people who can care less? Even when I "win" the repair is never 100%. Taking it one step further a fourth party buys my faulty file and credit rating and uses it not to determine IF they will do business with me but how much it will cost me. There is a lot wrong here. 1) Privacy of any kind is an illusion. 2) We are being bled white by Corporate America. 3) Why this system is legal speaks volumes about our politicians.
I suggest a new system. When I apply for credit I supply the references and it is up to the creditor to verify them.
Good heavens,...this topic is making me ill. They are all FOR PROFIT companies. Of course a measly $5.00 error causes a dramatic hit. It helps keep the vast majority of Americans in the sub-prime market. If there is any politician that wants to gain instant popularity with Middle America, they need to simply say that they intend to dramatically reform the credit scoring system. That, my fellow readers is a topic that really gained a foothold in the 80's and they are allowed to run the show. It is the most carefully crafted bias system in the world. Ever wonder where a $17 million dollar bonus comes from?
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