Is There a Money Limit Debt Collectors Can Report to the Credit Bureau?

You might think that nobody would go through the trouble to collect on a small unpaid debt, like an overdue book, but anything can appear on your credit report. As long as a collection agency holds a debt it can report it to the credit bureaus. Debt collectors do not necessarily care about the size of a debt when deciding whether or not to pursue it.

Identification

There is no limit to what debt collectors can report to the credit bureaus. Reporting delinquent accounts to the credit bureaus is one of the best collection tactics in the employ of debt collectors. In the case of very large debts, the original creditor might choose to pursue litigation rather than take a loss of thousands of dollars selling it to a collection agency. If the creditor does not report to the credit bureaus, the bureaus might never know about it. Smaller debts are often sold off to debt collectors because of the administrative and legal cost to creditors without a debt collection department.

Small Debts

Debt collectors usually call accounts worth less than $100 "nuisance" debts because the company has to pursue debt, but there is little money to be made. In 2008, the Fair Isaac Corporation changed its credit rating formula to ignore debts under $100. Nuisance accounts still appear on your credit report, but do not affect your credit score, assuming that your creditor uses the latest version of the FICO formula -- FICO 08.

Considerations

You should not ignore any unpaid debt. Lenders may require you to pay nuisance debts regardless of whether or not they impact your credit rating. The bureaus usually pick up civil judgments if a creditor takes you to court. Creditors often design their own credit scoring formulas, which might include collection accounts of any size. Almost all financial transaction are tracked, so it is likely that any collection account affects your credit somewhere down the line.

Time Limit

Collection accounts definitely have a credit reporting time limit: seven years from the first time you missed a payment. Thus, if you are close to this date it may not make sense to pay it other than a moral obligation. This differs from the statute of limitations. Most states do not allow creditors to sue for an unpaid after a certain amount of time -- usually no more than six years and up to 10 years in some states.