Medical Collections And Your Credit Report

Since I started in the mortgage business in 1996, the most common negative item I have seen on credit reports are medical collections. One report I saw had over 100 of them, but the majority of reports that have them at all typically have just one or two. When I have questioned my customers about them, the most common response that came back my way for what happened was that the person thought that the bill was being taken care of by their insurance company.

Medical Collection Accounts Drop Credit Scores
Often, as is the case with a blown medical bill that ends up in collection, credit scores drop. A recent medical collection can be grounds for a mortgage application getting disqualified if the collection is not an FHA mortgage. Fannie Mae and Freddie Mac have less tolerance for collections than does FHA especially when it comes to recent collections.

Pay The Bill First Then Dispute It
Do not take the high road of being right and the insurance company is wrong. You have way too much to lose with your good credit standing and high credit scores to get into a pushing match with your insurance company. Do yourself a favor, if you have an outstanding medical bill that is only a few hundred dollars or less, pay the bill and fight it out with the insurance company after the fact. This will save you a lot of grief in fixing your credit report and waiting for your credit scores to return to normal.

Options If You Do Get A Medical Collection Account
But, if you happen to have had a medical bill go to collection status you have some options for getting it corrected with minimal damage to your credit report and credit scores. First of all, if you find out that you have a medical collection and your credit scores have tanked one of the first things you should do is call the doctor’s office or hospital where the bill is due and make arrangements to pay the bill directly to them.
In many cases, medical bills are not sold off to collection agencies. Bill collectors are hired to collect on behalf of the medical office where the bill is due as bill collectors are more effective in collecting past due debt than are the doctor’s office staff. If the original billing office will work with you take payment, one of the things you want to make sure happens is that they cancel the collection account with the collection company.
When this happens you have a very good shot of getting the collection account removed entirely from your credit report. This is because the collection account can be cancelled by the original creditor. In paying the collection company instead of the original medical office you are in a sense validating the past due status of your account with the collection account. In this situation, many times you will have a harder time getting the account removed from your credit report. But by going directly to the medical office first, they can cancel the collection account with the collection agency which can then be deleted from your record.

Protect Yourself From Medical Collection Accounts
No matter whether you have a new carrier or an old carrier, when you get a bill in the mail from your doctor’s office or hospital or some other form of medical office you need to give that bill some attention right way. You cannot count on that bill being satisfied by your insurance company. Ignoring the bill by taking the stance that your insurance carrier will cover it is not a good idea. Policies change, billing departments change, personnel change all across the medical industry. In a real sense – Stuff Happens.
Even if you have had a particular bill covered in the past, all you need to do when you get a bill is pick up the phone and call your insurance carrier to ensure that any new bill is covered by your policy. A simple phone call can save you a lot of heart ache later on down the line – after you’ve received a harassing debt collector letter and phone call and your credit report scores have gone down 40 points.
For information on how to handle debt collectors see: Negotiating Your Debt With Collection Agencies.