Movie Horror: A Debt Collector Came After Me for $8.97

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Debt collector
Alamy
By Deanna Templeton

We recently received a question from a reader who is looking for help with a past-due movie rental that went to collections:

Today I received a letter in the mail from a collection agency stating that a DVD I rented from Family Video (probably 5 years ago) has gone to collections. The total that I owe is $8.97. Am I going to get a bad credit score for an unpaid bill of $8.97?! Help would be greatly appreciated.
– Jillian

The debt collection industry has grown into a multi-billion-dollar business, and in order to stay competitive and profitable, collection companies are buying collection account portfolios from almost any company that's willing to sell them or commission them to collect on their behalf. This includes credit card issuers, auto and mortgage lenders, cell phone companies, utility companies (cable, Internet, water, etc.), public libraries, gyms - and even video stores, as evidenced in your case.

A few years ago, these types of low dollar collections made headlines when a number of people began receiving collections for old, unpaid library fines that had been turned over to collections and reported in their credit reports. Yes, even minor past-due debts can turn into collections, regardless of how minor the amount. It's something we should all be aware of.

If you find that you owe a small debt that seems trivial or insignificant and you're on the fence about paying, it's better to pay it than risk the chance of it turning into a collection and potentially hurting your credit down the road. No one wants to deal with the hassle of a collection, and it's important to remember that a forgotten movie rental can happen to any of us.

Will a $9 Collection Hurt Your Credit?

The short answer here is: It depends. If the collection agency reports the collection to the credit bureaus, the answer is, yes, it will most likely have a significant impact and hurt your credit score. When it comes to collection accounts, the amount of the collection has no direct impact on your credit score. It's the fact that the account made it to collection status that matters. This means a collection of $8 is just as damaging as a collection of $5,000 -- with two exceptions.

Exceptions to the Rule: FICO8 & VantageScore 3.0

In late 2008/early 2009, FICO made several significant updates to the FICO credit score model, including how low dollar collections were factored in the score calculation. In the FICO8 model, collection accounts less than $100 are excluded from the calculation. This means an $8 collection would have no impact on your credit score. It's important to understand that this is only the case with the FICO8 version of the FICO score. And although lender adoption of FICO8 continues to grow, many lenders are still using older versions of the model. You also have to consider that some lenders may not use the FICO score at all - many do, but some do not.

Some lenders may use VantageScore 3.0, the newest version of the VantageScore model. This model doesn't factor in any collection accounts that have been paid or settled. So, if you pay the $9 collection account, it won't impact your new VantageScore 3.0.

How to Respond to a Collection Letter

If you receive a collection letter in the mail, it's important that you address the collection as quickly as possible. If you think the debt might not be yours or you don't agree that you owe the debt, you only have 30 days to dispute the collection and request that the debt be validated.

If the collector is unable to validate the debt by providing written proof that the debt belongs to you and that you do in fact owe it, they have no grounds for pursuing the collection and must stop all further collection attempts. If they don't, they will be in direct violation of the Fair Debt Collection Practices Act.

If the debt is valid and you owe it, it's best to pay it. For higher dollar collections, we'd normally suggest negotiating a settlement over paying the full amount, but there's not much room for negotiation with an $8 debt.

It would be worth contacting the collection company directly to find out if they plan to report the collection. Order copies of your credit reports from AnnualCreditReport.com to confirm whether or not the collection has been reported yet. You can also monitor your credit score every month to ensure it isn't reported using the free Credit Report Card. If the collection agency has not yet reported the collection, it may be in your best interest to go ahead and pay the $8 rather than going through the hassle of disputing or validating the debt.

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7 Comments

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setanta54s_back

i have a small suitcase filed WITH UNPAID BILLS/collections red letters etc--
they're ALL FROM REPEATED HOSPITALIZATIONS
on a natural born AMERICAN CHILD
with handicapping CONDITIONS REQUIRING HOSPITALIZATIONS
and i REFUSE TO PAY ONE CENT
a i watched EVERY SINGLE ILLEGAL GETTING FREE TREATMENT ETC
and a handicapped AMERICAN CHILD getting absolutely nothing from the social security bastards or the OVERPAID BS SOCIAL WORKERS that refused to EXPLAIN THE SYSTEM
or put the papers IN.
every discharge summary STATED handicapping conditions and CODES.

now having said THAT..... NEVER HAD A PROBLEM WITH CREDIT..

May 02 2013 at 11:41 PM Report abuse rate up rate down Reply
mgarfi9258

lost my job,insurance.got sick.i was paying off my way way absurd,overcharged hospital bills every mo.even more than amt agreed on.but the hospital turned over the acct to a collection agency anyways.the hospital refuses my repeated requests for statements,amounts owed.the collection people send me amounts that they claim i must pay.i don't know where they come up with these figures.or even if i'm credited with the payments i still make every mo. to the hospital.hospital said they'd get these clowns off my back.they have not.now on top of being very ill i'm harassed daily with phone calls,mostly computer calls.i won't speak to these people.i no longer care what they'll do.after 50+ yrs of hard work,often 2-3 jobs.i'm losing everything. i've enough for maybe 2 yrs.then it's the street for me.i'm 60.living on ramen and p.nut butter for 5 yrs now.and all because of the abuses charged to medicare that we be cut soon.what am i supposed to do?can do?i'd love,wish i could pay this off.i can't.maybe i'll just stop paying like many others.illegals who don't pay at all.welcome to the "american nightmare".shameful.st josephs hospital in reading pa.

April 11 2013 at 10:53 AM Report abuse rate up rate down Reply
1 reply to mgarfi9258's comment
setanta54s_back

man these are OLD stories out here
but maybe YOU come back to check on this ?
have you called the atty general ? better business bureau ? consumers ?
POLITICIANS ?
and START WITH NO STATEMENTS-

and are these collection agencies LICENSED to collect in YOUR STATE ?

google YOUR RIGHTS in YOUR STATE
as the collection agencies MUST TELL YOU WHERE THEY GOT THE ACCT FROM,THE AMOUNT etc etc and if they won't provide this
you don't pay.

May 02 2013 at 11:34 PM Report abuse rate up rate down Reply
suesbrother

I had my $32,000 home equity loan almost payed off. I went online and payed the remaining balance show, a little more then $4,000. Two months later I get a phone call from a collection agency saying I still owe 75 cents in intrest. My bank was kind enough to for give it.

April 11 2013 at 9:53 AM Report abuse rate up rate down Reply
ga7smi

you lose your claim to a debt if you don't vigorously try to collect it - your being scammed - send it to the State you live in and challenge it with the credit reporting agency - find an attorney to sue them for a percentage, etc - these people should be prosecuted - you can pay it and help the jerks keep going

April 11 2013 at 9:39 AM Report abuse rate up rate down Reply
mdennish

I received a bill from a collection agency for $319.99 for medical bills at a hospital. The problem was that i had never been in that hospital, i asked for validation and they were unable to provide any paper work to justify the bill but they kept sending me bills and calling me. I turned their paper work over to a lawyer which initiated a law suit and they were out of business in 3 months.

April 11 2013 at 9:20 AM Report abuse +1 rate up rate down Reply
1 reply to mdennish's comment
ga7smi

good job

April 11 2013 at 9:39 AM Report abuse rate up rate down Reply