Lesson #21: Removing medical collections from your credit report

Any account in collections is going to negatively impact your credit score. Medical collections can be especially difficult to remove from credit reports, and while they still lower your credit score – medical debt is often ignored by lenders and you will still be able to be approved for credit, just with a higher interest rate.
In some cases, it may be possible to remove medical collections from your credit report entirely. This is especially true if the collections appear due to a mistake. In these cases, you can petition to have the collections removed, which could cause a dramatic difference in your credit report. There are still potentially other situations which may work in your favor in getting them removed, for example if the collector is violating HIPAA or FDCPA laws. Sometimes you can even negotiate to have the collection removed if you pay off the balance.

What is a Collection Account?

A collection account starts off as any type of credit account that has not been paid on time. This may be anything from an auto loan, line of credit, or in this case, medical bills.
The account does not go into collections immediately once you miss a payment. Depending on the entity that is owed the balance, an account will usually go to collections after 90 to 180 days of nonpayment. The company you owe the debt to will then count the debt as a loss and write off the account as charged off in their records – and this will be reflected on your credit report.
The original creditor will then sell the debt off to a collection agency. This collection agency opens their own account with the debt called a collection account. All of this makes its way to your credit report, lowering your credit score and creates a mess for you to deal with later.
Now, a medical collection account in particular stems from a medical bill that you have either neglected to pay or forgotten to pay. In some cases it may also be that an insurance payment came in too late. In any case, an unpaid medical collection account can damage your credit score and leave a large blemish in your credit history.
That does not mean your situation is permanent, however. There are ways you can fix it.

Medical Accounts are Slightly Different Than Regular Accounts

Until very recently, medical debt was treated the same as any other debt. Now, due to a number of factors such as delayed payments from insurance companies, medical debt is treated slightly differently than other debts.
Depending on the credit scoring system you or a creditor uses, medical debt may be weighted differently than other debts. Some scoring systems ignore medical collections accounts that have been paid off. Others will still count them, but weigh unpaid medical collections accounts less heavily than other types of collections accounts.
Additionally, the National Consumer Assistance Plan (NCAP) of 2015 made changes to the way bureaus treat medical accounts. Among the changes, the NCAP adjusted how medical accounts work to make room for delayed insurance payments.
For instance, an unpaid medical debt cannot be added to a credit report until after 180 days from the time the account was reported to the agency. Additionally, any account that goes to collections but is then paid off by an insurance agency must be removed from the person’s credit report.
These changes are good news for you, as they reduce the impact of medical collections accounts.

What You Can Do About a Medical Collection Account

If left unpaid, a medical collections account can do some pretty significant damage to your credit score. Payment history is very important to creditors, and a history of unpaid debts will have a larger impact than any other factors.
With that said, there are some options when dealing with a medical collections account.

First, Correct Inaccurate Information

First and foremost, go through your credit report and be sure that all the information provided about the medical account is accurate. Check the balance of the account and cross reference it to any original medical bills you have. Check the dates listed, as well as the name of the original creditor.
Sometimes the large impact from a medical collections account may actually be due to user error. Issues such as a collection agency accidentally not marking the debt as paid off, or old charges that are appearing on your credit report past the cutoff date are two examples.
If you find any discrepancies between your records and the credit report, report them to the credit bureau. The major credit bureaus, TransUnion, Experian, and Equifax will often work directly with you and the original creditor to remove any inaccurate information in these cases.

Ask For Proof of Debt

If a debt collector contacts you about medical collections, you have the right to (and should) ask for the proof of debt. Ask for this information within 5 days of the debt collector first contacting you. They will send you written information about the debt, including:
  • Your name
  • The amount of debt you owe
  • The creditor you owe that debt to
  • A statement saying the creditor will abide by any written request you deliver within 30 days asking for information about the original creditor (if the information is different from the current creditor)
  • A statement that requires you to challenge the debt within 30 days if it seems inaccurate, or the debt will be assumed to be valid
  • A statement saying that if you dispute the debt, the creditor will get verification of your debt or a judgement against you (they are required to mail you a copy of this verification)
This step helps you to validate that the debt the collector is contacting you about, is in fact yours. If you are contacted about a debt you don’t believe you owe or have already paid off, this is an essential step before moving forward to challenging the debt.
In some of these cases, such as a mistaken debt due to medical coding or clerical error, the creditor will not be able to verify the debt. This makes removing the collection account that much easier.

File a Dispute

If you find any discrepancies or inaccurate charges, it is time to file a dispute. Gather any important information, such as original medical bills and the creditor’s proof of debt, and file a dispute with the credit bureau. You’ll need information about the account, along with the medical bills or other paperwork showing proof the information on the credit report is inaccurate.
When you file a formal dispute, the credit bureau must respond and deal with it in a timely matter. If they find that the account is inaccurate, they will remove it from your credit report.

Dealing With Accurate Collection Accounts

When dealing with accurate medical collections accounts, it is important to decide how and when to pay on each account.
In most cases if the account is current, the best idea is to set up payments and pay the account off in full.
One thing to be aware of is the statute of limitations in your state. Once a debt reaches a certain age (it varies with each state) and you have not paid on it off, the debt more expires and the collection agency cannot sue you for the remaining balance.
It is important to note that if you ever do make a payment on such a debt or even make a promise to pay, it restarts the date on the statute of limitations.
There are gray areas here as well, and some states may still require you to pay a debt that is technically past the date. If you have a debt that is nearing the statute of limitations time in your area, talk to your lawyer or a credit specialist about how you should proceed.
If you are still responsible but do not have the money, many collectors may offer you a settlement offer which will settle the account for less than you owe. However, keep in mind that a settled account does not look as good as an account that was paid off in full, and this may affect your credit moving forward.

Final Thoughts

If a medical collection account appears on your credit report, first check to be sure it is legitimate. If it is not, challenge it. If it is legitimate and current, the best idea is to start making payments to clear your poor credit history to begin repairing your credit score.
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