New collection efforts by municipal governments can hurt your credit rating.

The Wall Street Journal reports (January 2006) that cash-strapped municipal governments are resorting to collection agencies for fines that were previously ignored if not paid, such as overdue library books, parking tickets, failure to pay transit fares and even “beach rescue fees” for people rescued by lifeguards on some beaches..

The Journal reports that Chicago has doubled revenues since 1997 when it “….began using a collection agency to track down unpaid parking fines.” And the Omaha, Nebraska “public-library system ….has collected more than $40,000 in fines and recovered about $75,000 worth of overdue books and materials” since it hired an outside collection agency. One company represents 750 libraries around the company in collection efforts.

While this may seem fair (why should anyone get away without paying their fines?) these small items can have a major impact on your credit rating. The Journal reported that one person lost an almost perfect credit rating simply because of a $40 late fee for two library books, one of which was a picture book for his child.

If this happens to you, and you owe the debt, you should not pay it until they have agreed in writing to delete any negative information on your file at the three major credit agencies. Even if you pay the debt, they can leave the negative entry on your file, which does not solve the problem. You will have lost some money and not improved your credit rating.

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