Can an unpaid utility bill trash your credit score?

Can an unpaid utility bill trash your credit score?

 

Problem:

We are planning to purchase a small house after a few months. We have saved money in the past few years to buy a house in this year. My wife and I have always tried to maintain good credit score. My credit score in the month of May 2011 was 750. But it has dropped to 680 in the month of June. I was shocked to know about it. I went through my credit report and found a negative item on it. It is about a utility bill. Apparently, I have failed to pay a utility bill back in 2007. The total debt amount is $ 175. The account has been assigned to a collection agency. My question is, should I dispute the item (since we were never informed about this debt) or repay the bill? I want to increase my credit score.  

Solution:

It is unfortunate that your credit score has dropped by such a huge margin. But negative items make a greater impact on the consumers with good credit score than the ones with low score. For instance, if your present credit score is 750 and you miss a payment on your home loan, then your score may drop by more than 85 points. However, if your score is 670, then the missed payment will reduce the credit score by 60 points.

You must not lose your hope of purchasing the house due to this unfortunate incident. You can still fulfill your dream. You could have secured the mortgage loan at 4.15% interest rate with a credit score of 750. But in the present scenario, you may have to pay around 4.55% interest on the loan. There is only a slight difference in the interest rate. I guess the lenders will not charge high interest rate on the loan if you can explain the entire situation to them clearly.

Lenders will scan through your credit report before approving the loan application.

They will want to know about your past credit transactions. When they will see that you have been a responsible consumer in the past, then they may overlook the small negative item that is there on your credit report.  

Your next step will be to contact the collection agencies and make a written request for a debt validation letter. It is best to repay the bill after receiving a proper debt validation letter. Tell the collectors that you were ignorant of the bill. As such, you wish to clear your dues. Request them to delete the item from your credit report after the bill payment.
If the collection agency is not able to validate the debt, then you should dispute the item with them. Thereafter you should send a dispute letter to the credit bureaus regarding this particular account. If the credit bureaus can’t prove that you owe the debt, then they will have to delete it from your credit report.

Finally, a lot of consumers often go to the online financial forums to get the right debt answers from the experts. Many a times, experts have been asked as to whether a 4-year-old delinquency can appear on the credit report suddenly. The right answer to this query is that utility companies normally don’t do such things. However, when an account is assigned to a collection agency, then the item can get reported on the credit report.

Related Posts

© 2017 Learn About Mortgage. All rights reserved. Site Admin · Entries RSS · Comments RSS
Powered by WordPress · Designed by Theme Junkie