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I recently started trading stocks and was trading on ameritrade. I went in with just a little money to play around with and try and learn about it, but I forgot to turn off margin trading apparently.

I'm now ~$50 in debt and I'm trying to figure out the best way to pay. I can't pay with online bank transfer because apparently my bank declined a payment and because of that I got my account locked out of it. I spoke to a representative and he said he can not enable it again. I could pay with wire transfer, but I've never done that before and I believe that has to be done in person, and I'm unsure if I will be able to get to my bank to do that.

If I leave the debt in there and the account ends up closing, I assume it affects my credit score in a negative way. Would it be bad to leave this in there, considering it's only a small amount? How bad would this be for my credit exactly?

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    Are you able to mail a check? – Ben Miller - Remember Monica Mar 23 at 19:09
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    Have you contacted Ameritrade and discussed your issue with them? They might be able to provide other options. – JimmyJames Mar 23 at 20:35
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    Leaving aside the impact on your credit score, if you don't pay it off, it's not like the debt disappears. Your broker will let it accumulate interest for a while and eventually sell it to a debt collector. So now you'll have additional fees and interest to pay plus someone will be calling/ sending mail trying to collect the debt. I find it highly unlikely that it will be easier or more pleasant to deal with paying the debt collector in the future than it is to find some way to get money to your broker today. – Justin Cave Mar 23 at 20:39
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    @JimmyJames absolutely this. Ameritrade wants your money so they'll probably be quite happy to help – Hobbamok Mar 24 at 9:30
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    Once you get back access to your bank account, switch to another bank. – user253751 Mar 24 at 11:10
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Credit scores are not completely transparent, but when I look at my score there's no mention of the magnitude of any events. Truthfully I have no bad events but the only indication is a count (0), not any indication of size.

A bad event is a bad event. It doesn't matter if it's a $10 default or a $10,000 default - it gets reported the same way from what I can tell. It's an indication that you were negligent with the credit that was extended to you.

To clarify based on comments:

There may be some differences in the effect for a small default amount in your score - whether the credit bureau treats it differently, or whether the broker reports it as a default or not, but you can't know that ahead of time, and it is largely irrelevant to my main recommendation:

Scrounge up $50 and pay it off somehow before it turns into a bad mark on your credit that costs way more than $50 down the line.

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    Ya, OP is vague on whether there are any securities left in the account or not, too. There is a big difference between the cash balance being -$50 if there are $1k of securities in it (in which case, they will probably gladly let the interest run on the margin until it gets high enough and they will sell the securities to cover the debt) or if there are under $100 in securities (including none) at which time they will start to demand payment. I agree with 'Scrounge up $50'. They will accept a check (assuming it doesn't bounce). They will accept lots of forms of money coming in. Figure it out. – R. Hamilton Mar 23 at 19:50
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    I don't think this is right. I have a mark on my credit for a bill that I refuse to pay because it's illegitimate and I when I refinanced my mortgage, my score was fine. I got a competitive rate. It just doesn't make sense to think lenders will treat a small debt the same as a large one. There's just too much advantage to be had by realizing e.g. making consistent timely payments on things like mortgages and car loans are more significant than not paying a single small bill. – JimmyJames Mar 23 at 19:50
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    If I'm reading this right, this answer is based on personal experience totaling 0 data points regarding how derogatory marks affect your credit, and no research or citations beyond that. That is not the foundation of a good answer. – user2357112 supports Monica Mar 24 at 13:52
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    Here's a sample Equifax credit report. Scroll through, and you'll see detailed information about charge-offs and collections, including amounts owed and how long various accounts were past due. Credit scores get to take all of that into account. – user2357112 supports Monica Mar 24 at 14:19
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    I think a bit of common sense applies here as well. If you were a creditor, would you be as willing to extend credit to someone who can't even pay a $50 debt as you would to someone who defaults on a $50,000 mortgage? Saying there's equivalence irrespective of debt amount is purely nonsensical. As pointed out, how long the debt has been owing is also a factor, but the credit bureaus are NEVER,NEVER,NEVER going to tell you how they score anything in your report! They'll speak in generalities about categories (debt ratio, age, etc.) but never anything you can use to game their models. – RiverNet Mar 24 at 14:39
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Just open another bank account with a different institution.

Walk in, sit down, leave with a new bank account and routing number. (You may be able to do this online with some institutions, but either way you need to fund the new account with some money you already have.)

Connect it to your brokerage account. Initiate a transfer of money that covers the margin debt.

Like any standardized or aptitude test, the troubles with your existing bank account are a "red herring" and not relevant to the solution.

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ANY unpaid debt is negative for your credit. That being said, there are so many different scoring models, even by the same bureau, that it's virtually impossible to assess the consequences. Some might place more emphasis on small unpaid debts relative to larger ones, others may look at installment debt default as more serious than auto debt default or mortgage default.

The bottom line is, find a way to pay the debt QUICKLY! Don't let it linger until it goes to collections and lands on your report. Once there, it'll be difficult to remove even if you pay it, unless the creditor is willing to do so as part of the repayment.

Still, get it paid somehow.

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There is no universal "badness" factor to any delinquent debt reported on a credit report and nobody knows the precise effect it would have on any credit score because there are so many credit scoring models in existence and most of them are proprietary formats that are kept secret from as many people as possible (ie. company insiders only will know the specifics or people with the time/patience to reverse-engineer the models, which has been done in the past but is quickly rendered dated as the models are changed, corrected, updated, improved and generally modified fairly regularly).

The negativity factor of any item reported on your credit is wholly dependent upon how other creditors who use those reports for determining creditworthiness will choose to hold it against you.

Some creditors will look at it and think "Eh, it's a very small amount so he probably just forgot about it or he moved away and doesn't know it's even there. No big deal." while other creditors will look at it and think "Wow, this guy can't even repay $50. And he thinks we're going to approve him for a $1200 computer? Idiot."

Nobody can tell you which experiences you're going to have because nobody knows who will be making future credit decisions based on your credit report. There's a possibility that it doesn't even get reported to any credit bureau (do they generally report your account on a monthly basis? if so, it's almost guaranteed to be reported. if not, it's actually illegal for them to report it on the trade line in many jurisdictions). The trade line is what stays there for the longer period (varies by location, usually about 6 years) but there is a separate section for collection items that it might still get reported in, although these are generally removed after about 3 years.

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As others have said, the precise details of credit scores are well-kept secrets, so it's difficult to know the exact effect.

But simply being in debt is not likely to have a negative effect -- that's what loans and margin accounts are for. Your score is impacted if you fail to pay your debts on time.

Furthermore, one late payment should have a minimal impact on your credit score. Everyone messes up occasionally, sometimes a bill gets misplaced. What they look at is your overall history of debt payment.

I'm not sure why you can't just write a check to Ameritrade -- are you concerned that the mail will take too long and you need to get the money to them immediately? Just do your best.

If you still have securities in the account, you can simply sell at least $50 worth, the received funds will go into the margin account automatically.

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Dealing with the knock-on effects, not just a ding on your credit, will be WAY MORE hassle than finding a way to pay Ameritrade.

Just call them up and tell them you'd like to pay them and turn off margin trading. Ask how they suggest you do this. If they say to wire the money, just explain that you haven't done it before, it seems complicated, and ask if there's any other way.

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Pay them by check, credit card, or debit card.

It will damage your credit enough to worry about. How much depends on the rating service, and who you want to use credit with in the future to buy something.

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It depends on what you need credit for. It could be that 5 years from now you want something and this $50 debt prevents you from being able to get it. Eventually you will need to pay the debt to get around that problem. Better to deal with it now than down the road.

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