Many people are surprised to learn that an unpaid debt of less than $100 could wreak havoc with their credit scores. This is because the credit agencies don’t care how big or how small a reported unpaid debt is. The only thing that they care about is whether or not the debt has been paid on time.

As payment history is responsible for roughly one-third of a person’s credit score calculation, failing to pay a small bill could lead to major credit woes. One woman was forced to accept a home loan at less than favorable terms due to a $100 credit card mishap. Even after the debt was paid off, the fact that it went into collections hurt her credit score.

While usually only major consumer debt such as a credit card balance or an auto loan balance are reported to credit agencies, it may be possible for an old utility bill or a cell phone bill to be sent to collections. While Equifax says that there are 200,000 accounts in collection worth less than $100, most people are never contacted about the debt because creditors don’t feel that it is worth their time. This means that they might not even know about the debt until it shows up on their credit report as unpaid.

Whether an unpaid balance on a credit card is $3 or $3,000, it could put an individual into a tough spot when it comes to his or her credit. A low credit score may make it impossible to get the best rates on credit card or home loans or make a borrower ineligible for a loan at all. Talking to an attorney who has experience in debt settlement cases may make it possible to resolve the debt and help a person get on the path to credit repair.

Source: FOX Business, “Small Debts Can Lead to Big Credit Score Problems“, Erica Sandberg, July 17, 2014