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Overdue library books impact credit scores

We're all serious about our credit records. They help determine whether we get approved for mortgages, sometimes whether we're hired for a job. But now, as CNBC's Carl Quintanilla reports, there are new surprises about what turns up on those reports.

Kevin Howard is the first to admit: He forgot to return a book to the Houston public library in 2004. That is, until he saw his credit record a year later.

"I literally had a heart attack," he says.

The city had turned his unpaid fine — about $30 — over to a collection agency,complicating his efforts to buy a home.

In fact, dozens of other cities — from San Diego to Baltimore — are now chasing an estimated $40 billion in unpaid fees, parking tickets, even utility bills.

Michael Ginsberg is head of a debt collection consulting firm and says cities where budgets are falling short have little choice.

"They can raise taxes, they can cut spending, or they can chase past-due accounts," says Ginsberg.

The trend is reaching even categories like high-speed toll lanes. But at what point is the damage to the debtor's reputation worse than the offense?

Maryanne Bowler is circulation chief at the Glenview, Ill., library, which last year collected $59,000 in fines.

"I suppose if I turned it around and it happened to me, I would feel, yes, it is excessive," says Bowler. "But I also feel the library doesn't have any other alternatives in order to maintain their collection."

What should you do if the bill collector starts calling?

"No. 1, don't ignore it," says Ginsberg. "It's real, OK? No matter how minimal it might be."

No. 2: Don't be fooled. Bill collectors don't go away, even if the phone calls stop. And when you do pay the debt, try to get a letter that agrees to remove the mark from your record.

Kevin Howard has tried to do just that. But the city of Houston hasn't budged, which means he'll have to wait seven yearsuntil it's finally erased — in 2012.

"This just caught me off guard," he says. "The punishment does not fit the crime."