Q: Does a delinquent bill that wasn’t attached to a credit line – like, for instance, an unpaid medical bill – affect your credit score?
A. The basic rule of thumb with unpaid bills is that any delinquency that gets reported to the three major credit bureaus will cause your score to go down.
Now, admittedly, places like hospitals – which aren’t actually lending money to anybody – won’t typically report your unpaid bills to Experian, TransUnion or Equifax. What they will do, however, is turn the debt over to a collection agency should it remain unpaid for an extended period of time (usually around the 90-day mark) and yes, these collection agencies will tell on you.
“Collection agencies have gotten in the habit of reporting to the credit bureaus because they use it as leverage to get people to pay off the debt,” Craig Watts, spokesperson for FICO, the company behind America’s current credit scoring model, tells MainStreet.
As such, you may want to think twice before ignoring bills that don’t have a credit line attached to it. The FICO score, at its most
basic, predicts whether or not a consumer can repay his or her creditors, and it considers a debt owed to a collection agency as a serious sign of trouble.
In fact, it’s probably going to hurt your score more than a late credit card payment, Watts says. He notes that your score can go down by 100 points in these cases.
This means you may want to make sure to pay off your utility, cell phone or hospital bills on time. Additionally, Watts warns, you may want to return those overdue library books.
“States have started turning over unpaid parking tickets and overdue library book charges to collection agencies,” he says.
The good news is that FICO will ignore any collection claim less than $100, so there is a bit of wiggle room if your bill is under that amount. But those who held onto to their public library’s dozen or so sets of The Twilight Saga for the past five years may want to return the books at their earliest convenience.
Want to know what can and cannot affect your credit score? E-mail your questions to firstname.lastname@example.org!