In the full version of the scene, he explains that he got the fleas when he was attacked by Buford, the same dog Kramer sics on him later in the episode, which was why he was so terrified of the small dog.
In the complete version of the scene, he clarifies that he acquired fleas after being bitten by Buford, the same dog Kramer later sets on him in the episode, which is why he was so frightened of the small dog.