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5 Small Debts That Can Hurt Your Credit Score

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Credit Score Headaches

No matter the reason, overdue payment on an outstanding bill or loan can damage your credit score. If even a $10 balance is one day late being paid off, which the industry counts as 30 days, could send your score plummeting more than 100 points, credit experts warn. The impact is even larger if you have a record of frequent late payments and/or lengthy periods before an overdue payment is made. The cost to you: It's harder and more expensive to get loans or new lines of credit. Beware these five small debts that can hurt your credit standing, and pay attention to eight tips that can help keep a score in the green zone.

Related: How You're Destroying Your Credit Score Without Knowing It

Medical bills
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Debt: Medical Bills

You may not remember the appointment or the argument that delayed payment, but medical bills can be marked as past due, sent to collection agencies, and reported after 180 days. Call the doctor's billing department and explain the situation to get more time to sort things out. If you know you owe the money but can't afford that much at once, ask about payment plans. The good news is that the latest scoring methodology, which spits out a number that many lenders use when determining how much to lend and at what rate, considers medical debt less detrimental than other types of debt.

Related: Bankruptcy: When Is It an Option?

electricity  meter
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Debt: Gas and Electric Bills

When moving out of an area, make sure that your gas and electric utility bills are paid up. Although service providers should be able to contact you if you updated your address with the post office and keep the same phone number, don't risk missing payments.

Related: Which States Have the Highest Gas Bills?

Cell Phone Bill
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Debt: Mobile Phone Service

It's terrible to be suddenly cut off by a stiffed provider from the services on your phone – with its maps, ability to organize your life and stay in touch with people, and summon cars and food – but the worse effect of nonpayment of bills can be on a credit score. If you settle a debt for less than the amount owed, that's generally better for a scores than not settling at all, but it may still be worse than paying the bill in full. In either case, when an account goes to collections or gets charged off, most of the damage has been done.

Related: The 7 Best Cell Phones for Seniors

Debt: Storage Units
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Cable Bill
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Debt: Cable and Internet

As with gas and electric utility bills, paying off what you owe cable and internet providers matters when it comes to credit scores. But many people don't think about them when it comes to managing credit.

Related: The Best Ways to Reduce These 13 Monthly Bills and Expenses

Tip: Wrong Address
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Tip: Wrong Address

You may never see the bill that's sent to an incorrect address. That's an unfortunate circumstance, for sure, but you're responsible for it nonetheless. Remember to update the address on your driver's license whenever you move and double check all information, including spelling, when applying for a new credit card, receiving services at an office, and arranging for any transaction that results in an invoice.

Related: 16 Steps to Get Organized Before Tax Season

Tip: Bounced Checks
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Tip: Bounced Checks

A bounced check doesn't necessarily lower your credit score, regardless of the amount, but it can dent your credit profile. This is because bounced checks are reported to the Chex Systems database rather than to the credit reporting bureaus (Experian, TransUnion, and Equifax). Lenders can look up your Chex Systems profile when you apply for a loan or open an account.

Related: 14 Ways to Improve a Bad Credit Score

Tip: 30 Days or Less
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Tip: 30 Days or Less

Some lenders wait a while before reporting late payments to the credit bureaus, but they're under no obligation to do so. Generally speaking, lenders for revolving accounts (credit cards) may give up to 30 days to make good, while lenders for non-revolving accounts (student or car loans) report sooner. Don't take any reputed waiting period for granted; even one day after missing a payment is a risk.

Related: States Where People Use Debt the Most Just to Get By

Missed Payment Penalties
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Tip: Size Matters, Sort Of

There is no free pass for late payments, even on small debts. The 99 cents outstanding on the credit card buried in a drawer can look just as bad as any other overdue payment. The latest FICO scoring systems and the competing VantageScore ignore "nuisance" collections worth less than $100. If you do the same, however, fines and interest will increase and the amount due keeps growing. Not all lenders use the latest scores, though, and lenders who pull up your credit report will still see the missed payments even if they don't affect your score.

Related: 32 Credit Card Mistakes You're Probably Making

Examine Your Credit Report for Mistakes
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Tip: Check Your File

You may request a free credit report from each of the three credit bureaus once a year. If you spread out the requests, you'll get a report every four months. The request can be posted at AnnualCreditReport.com (not to be confused with other websites bearing similar names). When you get the report, look for accounts with a balance that you don't recognize or for any unexpected red marks in your payment history. CreditCards.com provides a sample credit report with explanations for each section. Incorrect information must be removed or changed within 30 days of the initial request.

Related: 21 Financial Lifelines to Help Small Businesses Stay Afloat

Tip: Pay Old Debts
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Tip: Pay Old Debts

Only the latest credit score calculations by FICO and VantageScore ignore old collections accounts once they've been paid in full. Not all lenders use the latest scoring systems, so your payment arrears may still have some effect. As the newest scoring systems become more widely accepted, it's all the more important to pay off old debts.

Related: Credit Horror Stories That Will Keep You Up at Night

Home finances bills
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Tip: Look for Odd Activity

Don't bother subscribing to a fee-based service that checks and monitors credit. There are many tools that let you check your credit score for free, including credit card issuers such as Discover and Barclaycard and free online apps such as Credit Karma and Credit Sesame. Use these tools to keep an eye on your credit score and any unusual activity. Some will even send alerts when bills are due or a new credit line has been taken out in your name.

Related: 24 Money-Saving Tools That Will Keep Your Budget on Track

Tip: Take Action
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Tip: Take Action

Some debts originate from places that don't actually loan money, such as hospitals, and unpaid bills are passed on to collection agencies. After trying to collect the money, the agencies often report the missed payments to the credit bureaus, often after 90 to 180 days. If you believe you've been contacted in error about an outstanding bill, dispute the debt within 30 days. The Consumer Finance Protection Bureau provides a sample letter to use as a template.

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