Creditors That Don’t Report to the Bureaus Can Still Affect Your Credit Score

Most people have cell phone bills, utility bills, rent payments,etc. While the majority of these do not report to the bureaus they can still affect your credit score if you become delinquent on them.

Once you are past due on any of these items after a certain amount of time, they will be turned over to a collection agency. Once that collection agency reports to the three credit bureaus it can cause grave damage to your credit score! Even libraries are using collection agencies now for unreturned books and most counties are now using collection agencies for unpaid parking tickets.

One of the common misconceptions about collections is that certain collections and the amount of the collection have more of an impact on your credit score than others. A collection is a collection is a collection. A $10,000 collection for a charged off credit card carries no more weight then a $50 collection for a medical debt or a cell phone/utility bill.

Once that collection is on your credit report it will be there for 7 years. And it does not go away once it is paid. There are some collection agencies that will negotiate to remove it once it is paid, especially if it is for a medical debt, but legally it will be there for 7 years. And any collection, no matter what the amount of who it is for can cause a score to drop by 100+ points depending on what the rest of your credit report looks like.

There is now FICO 09 and the Vantage score that does not calculate medical and some other collections into the scoring models once they are paid. But since Fannie Mae and Freddie Mac do not utilize these scoring models it does not benefit the majority of consumers.

If a consumer does have a medical collection that shows up on their credit report, a good strategy is to go to the original creditor first and discuss the debt with them. Consumers usually aren’t aware of most medical collections because they assume their insurance has taken care of it. If they go to the hospital or Doctor that the original debt was owed to and explain that they thought the insurance company had covered it, they might be willing to take the payment from the borrower and then notify the collection agency that the debt should not have gone to collections and should be removed. This won’t work 100% of the time or for all medical collections but it never hurts to ask!

The important thing to remember is to pay all bills on time. If you’ve been to the doctor or a hospital, keep track of what the insurance is paying and keep in contact with the doctors to make sure that the bills have been paid. Even if the creditor doesn’t report to the bureaus it can still end up causing damage if their bills go unpaid.

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