First Person: When a Minor Billing Error Causes a Major Credit Headache

Our son experienced a scary incident involving a minor billing error with AT&T and the major impact it caused on his credit. It shows the importance of being diligent about any past due bills and monitoring your credit report.

He opened a U-verse account with AT&T to get high speed Internet service at home. They sent him a self-install kit with a modem, but there was a problem with AT&T's ordering system and the order was canceled. When AT&T re-did the installation order, they issued him a new account number and they sent him another self-install kit, which they told him to return using the included UPS label, since he still had the initial kit. The service was installed successfully and he returned the modem to AT&T as directed and continues as a customer. He used the original AT&T packaging and the UPS labels provided.

He then received two past due bills for $80 for the modem he had already returned, as AT&T had been confused by the different account numbers and showed the modem as still outstanding. Our son spoke with customer service at AT&T who assured him they would take care of it and then he received a letter from a collection agency, which he responded to by certified mail. He again called AT&T who assured him it was taken care of.

None of this apparently mattered, as the debt was report to Experian as a negative, unpaid bill on his credit report.

Our son has perfect credit, with no missed or late payments, ever. He has bought and leased several cars, all paid off, all paid on time. As the owner of his own business, he sometimes needs to use his credit to fund things until payments come in, so his credit fluctuates between the high 700s when things are paid and the low 700s when he is using his credit more often.

As a result of this one negative mark coming when his credit score was around 700, two of his credit cards cut his credit limit and one card raised his interest rate to the penalty level, from 15.9% to 24.9%. His credit score also dropped almost 50 points.

To make matters worse, your credit score is based on the ratio of credit available to credit used, with 30% usage considered ideal. When the credit card issuers lowered his credit limit, it raised that debt ratio, damaging his credit score even more, which then also causes other credit grantors to raise interest rates or lower credit limits.

Fortunately, the situation seems to be having a positive resolution. AT&T has already corrected the account and sent notice to the collection agency and Experian that it was an error. His bank has already lowered his interest rate back down and increased his credit limit back up. This was after hours of phone calls and asking for help. Wells Fargo was the bank that was most helpful. There he was able to speak with an underwriter who reviewed his personal (perfect) history with Wells Fargo and restored his credit limit and rate.

In these days of tight credit and instant reporting, consumers need to be vigilant to prevent this from happening to them. At the first late or past due bill, you need to contact the billing company and resolve the issue immediately. Check your credit report for errors, you don't need to pay for monthly monitoring, you have the right to a free copy each year, and also a free copy if you are denied credit or think there is an error. Go to the official US Government website, annualcreditreport.com, for the best information. Be careful of similarly named sites, as many of them are simply trying to lock you in to pay for monthly credit monitoring.

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