Chicago, IL – Doctor Bills Can Hurt Your Credit, Even After They’re Paid Off

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    Chicago, IL – Mike and Laura Park thought their credit record was spotless. The Texas couple wanted to take advantage of low interest rates, so they put their house on the market and talked to a lender about a mortgage on a bigger home in the Dallas-Ft. Worth suburbs.

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    Their credit report contained a shocker: A $200 medical bill had been sent to a collection agency. Although paid, it still lowered their credit scores by about 100 points, and it means they’ll have to pay a discount point to get the best interest rate. Cost to them: $2,500.

    A growing number of Americans could encounter similar land mines when they refinance or take out a loan. The Commonwealth Fund, a private foundation that sponsors health care research, estimates that 22 million Americans were contacted by collection agencies for unpaid medical bills in 2005. That increased to 30 million Americans in 2010.

    cing a home. About 3.4 million Americans have paid-off medical debt lingering on their credit reports, according to the Access Project, a research group funded by health care foundations and advocates of tougher laws on medical debt collectors.

    Among them are Nathen and Melissa Cobb of Riverton, Ill., who tried to refinance their home last year. They didn’t qualify for the loan because of $740 in medical bills that had been sent to a collection agency. The Cobbs were surprised because the bills — nearly a dozen co-payments ranging from $6 to $280 — had been paid before they tried to refinance. The collection action took their credit score from good to mediocre and is likely to mar their credit report for years.

    “I’m not one of those people trying to ditch out on my bills,” 34-year-old Melissa Cobb said. “I’m really frustrated.”

    Medical bills make up the majority of collection actions on credit reports, and most are for less than $250, according to Federal Reserve Board research.

    The Parks had no idea a billing error they’d sorted out a year earlier — they never actually owed the $200 — could affect their credit. They didn’t know the bill for a co-payment on a scan Mike Park needed had been sent to a collection agency.

    “We’ve prided ourselves in having impeccable credit. We worked hard to establish that,” said Laura Park, a 51-year-old office manager married to a 53-year-old firefighter. They are going ahead with the home purchase while trying to fix their credit report.

    “I’m very upset,” she said. “It’s going to be a nightmare, and who knows how long this is going to take to resolve.”

    Matt Ernst, a vice president at Mortgage Lenders of America in Overland Park, Kan., said medical collections frequently turn up on credit reports.

    “We see a ton of them,” Ernst said. They have an impact on financing, he said, but even he didn’t realize how much until he learned that someone with a credit score of 680 — which is considered good, but not excellent — would see their score drop up to 65 points because of a medical collection.

    “I didn’t know a medical collection would hammer it that hard,” Ernst said. “Our investors require a 620 to even get a loan.”

    It’s a problem for insured and uninsured people alike. Outright billing mistakes, confusion over whether a claim will be paid by insurance and disputes between insurance companies and doctors can all lead to medical bills being sent to collection agencies.

    Congress is considering legislation — the Medical Debt Responsibility Act — that would require credit agencies to delete paid-off medical debt from credit reports within 45 days.

    “We’re not talking about somebody buying a big-screen TV and not having the ability to pay. This is debt incurred because of a health condition. That makes medical debt unique,” said bill cosponsor U.S. Rep. Don Manzullo, an Illinois Republican.

    The bill has bipartisan support in the House, said cosponsor U.S. Rep. Heath Shuler, a North Carolina Democrat. Shuler said the health care industry sends delinquent bills to debt collectors quicker than any other industry.

    “If it wasn’t an industry that sent it straight to collections, we wouldn’t be having this conversation,” Shuler said.

    A Senate version of the bill was introduced last week.

    The Affordable Care Act, President Barack Obama’s health care law, prohibits tax-exempt hospitals from using “extraordinary collection actions” until it has made “reasonable efforts” to determine whether a patient qualifies for financial assistance.

    But it’s still unclear how that will be interpreted and whether reporting late bills to a collection agency would be considered extraordinary, Chicago-based health care consultant Jim Unland said.

    More Details: How to check for medical debt; what to do if you find it

    • Go to the government-approved site www.annual creditreport.com and request a free copy of your credit report.

    • If you find a mistake in your credit report, you can dispute the error with the credit reporting company. The Federal Trade Commission has steps for disputing errors, including a sample dispute letter, at www.ftc .gov .

    • If the bill wasn’t a mistake, there’s not much you can do, experts say. It’s theoretically possible to get a collection agent to delete an account from a credit report once the bill is paid, but it’s very difficult.

    In some cases, the impact on your credit score could decrease over time. After seven years, the record of the collection will be taken off your credit report and your score should rise.


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    20 Comments
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    Member
    12 years ago

    Another reason for you to be interested in Health Care improvements in the USA.

    jonkamm623
    jonkamm623
    12 years ago

    someone should rate the credit bureaus i think they stink.Who the hell are they anyway.

    springvalley
    springvalley
    12 years ago

    There is one way to avoid this mess
    Never share your SS number with your doctor / hospital / clinic

    12 years ago

    Make sure BEFORE your doctor takes any blood or does any biopsy that he sends your specimens to a PARTICIPATING lab. Otherwise you will be stuck with a bill from anywhere from $900 for a simple blood test to thousands for more complicated tests.

    Mark Levin
    Mark Levin
    12 years ago

    Sounds to me that the underlying point of this article is pro obama care socialized medicine. You know something, despite all the pitfalls of bad credit, at least you have a life as opposed to the lack of life one will have with ObamaCare.

    12 years ago

    There is a new FICO rule that debt under $200 shouldn’t colculate in your score, regardless there is the HEPA rules in regards to medical bills where collection companies violate this by disclosing information on the debt and that rules them to delete the item from your report

    12 years ago

    Collection agencies are notorious for having the wrong information on file, and harassing the wrong people. In addition, credit files often contain outdated, obsolete, as well as inaccurate information.

    Butterfly
    Butterfly
    12 years ago

    I believe them!! I received the past due bill from Maimonedes before I received the regular bill, which was already PAID!!

    Rabbi_In_The_Know
    Rabbi_In_The_Know
    12 years ago

    Interesting. I’d say that you should only be concerned about your credit reading if you plan to live beyond your means. If you’d be buying your home when you have the funds available, then you don’t need a mortgage. If you’d drive the car you can truly afford, there is no need for a credit check. – The credit industry tries to entice us with a score that is detrimental to us, just so that we end up borrowing even more.