The nine rules of credit: Which unpaid bills will impact your rating immediately?

It is also important to know what is on your credit report. Suppose you find yourself in a financial bind and you have to choose which bills you’re going to pay first that month. You should pay the bills that will affect your credit the most. By no means am I suggesting that you shouldn’t pay certain bills, but if there are times when extreme circumstances arise, such as an illness, death in the family, or loss of employment, you may have to make choices. During these times, when you can’t pay all your bills, it’s good to know that bills such as rent, heat, hydro, water, phone, cable, and taxes don’t affect your credit score right away. However, if these bills go unpaid for a number of consecutive months, they will be sent to collections.

Collection companies specialize in finding and collecting outstanding debts and provide services on behalf of the banks and lenders.

Once your bill is with a collection company, it will immediately register the black mark on your credit report. The collection shows up under the public records portion of your credit report where you will also see any bankruptcies, consumer proposals, and all the rest of the biggest negative hits to your credit. Public records including collections really hurt your credit. Unfortunately, paying the collection doesn’t remove the damage it has done because a collection will stay on your credit report six years from the time it was first registered.

You may be surprised how many people have collections recorded on their credit reports. Most times people don’t even realize it. They usually find out when they apply for some type of financing.

The hardest part about discovering that you have a collection reported when you’re applying for financing is that it can ruin your chances of approval, or at least cost you higher interest or fees. Either way, it is something most lenders will want confirmation it is paid before they will provide you with additional financing. The easiest way to confirm payment is by receiving a letter confirming that the account has been settled in full or the account balance is now at zero. Please make sure you keep this letter for at least six years as collections have been known to come back on your report even after you have paid.

If you have paid the collection and it is still showing up with a balance, please visit http://www.TheAverageJoeBook.com for services available to have it removed quickly.

Source: RICHARD MOXLEY Contributed to The Globe and Mail Published Thursday, Jul. 16, 2015 6:00AM EDT

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