Medical bills can stay on your credit report for a maximum of seven years. However, it typically takes about six months or 180 days before a medical provider (hospital, doctor, dentist, etc.) actually charges off the account or writes it off and sends the debt to a collection agency.
For example, let’s say you had an emergency room visit. Once you return home, for the next roughly six months you’ll receive phone calls and itemized paper bills for your hospital visit. After six months of non-payment, the medical provider will either sell or assign your account to a debt collector.
The hospital, and most medical providers won’t actually report your account information to the credit bureaus. Instead, the collection agency who now either owns or is working in conjunction with the medical provider will begin calling you, sending paper statements, and they’ll report the negative information to the credit bureaus.
This will hurt your credit score. Anthony Sprauve, a spokesman for FICO, says collections on your credit reports can damage and drag your credit score down by as much as 100 points. But, there is hope.
Listen, if O.J. didn’t have to serve his maximum prison sentence, chances are you too can get out of bad credit prison early. In fact, there is no minimum amount of time medical bill collections must stay on your credit reports.
The purpose of this article is to share how your medical bills ended up in collections, what your rights as a consumer are, and steps to take towards potentially paying off collections. And most importantly how to remove medical bills from credit report files and long before seven years.
Medical Bill Collection Weapons
Let’s first share what collection agencies can actually do to collect this debt. They came to possess the rights to your account either by directly purchasing the rights from the medical provider.
Or it’s possible their working on the account with a consignment contract. This is where they’d share any money collected with the medical provider.
Nevertheless, the collection agency is going to start calling you, sending demand letters, and they’re going to report negative information on your credit reports. In addition, it’s likely they’re going to inflate your total balance.
Debt collectors can legally charge you a high-interest rate, and believe it or not collection fees. Their goal is two-sided, first to pressure you into contacting them to resolve the debt. And second, so they can negotiate and settle your account for less than the total balance due.
If this collection agency is unable to collect payment, they have two options. They can package your account into what’s called a debt portfolio and sell that to another debt collector. This new collection agency is, of course, going to start calling you, sending letters, and they’re going to report more negative information on your credit reports.
Alternatively, they can sue you. As in file a civil lawsuit against you. Their goal is to win a judgement, because then they’ve really got you by the short and curlies.
Judgements can result in wage garnishment, liens being placed against you and or your property, and even asset seizure. For full details, check out your local legislation, because every state has unique laws.
Not to mention a judgement on credit report files, is tantamount to setting off a nuclear weapon on your credit score. It will inflict an enormous amount of damage and many folks see their credit score drop hundreds of points.
Medical Bills and Credit Score
There’s much ado these days about our medical bills and credit score. In addition, to the political debate over healthcare. You’ve likely heard about how the newest FICO 9 version of the credit scoring algorithm is much friendlier to medical debt.
It’s true, the newest FICO 9 credit scoring algorithm weighs medical bills and collections much better for consumers. As in there is less penalty.
The problem is while some companies are now offering to let consumer’s see their FICO 9 credit score for free, virtually no companies including these actually use the FICO 9 score for lending decisions. To clarify, medical bill collections currently will decimate your credit score.
Does Paying Off Medical Collections Improve Credit Score?
Sure seems like it should. But as of 2018, and moving forward, no. If all you do is pay off medical collections and nothing more, the only thing that’ll happen is a change in the status of the item on your credit reports.
It’ll be changed to a paid collection. This is still a negative item, and it’s guaranteed to lower your credit score. It’s mission-critical that we remove collections from credit report files, this will help your credit score.
How To Negotiate Medical Bills With Collection Agency
Now, let’s discuss how to negotiate medical bills with collection agency and so it’ll help your credit score. Before we sit down at the negotiation table, you need to know there are rules and federal regulations.
The Fair Debt Collection Practices Act (FDCPA) is federal legislation passed intended to regulate the debt collection industry. In short, debt collectors are required to be honest, up-front, and straight-forward.
They can’t lie, deceive, or manipulate. The FDCPA says much more and it’s worth reviewing in detail, at your convenience. The big coup of the FDCPA is the right to request debt validation on your alleged collection account.
1. Request Debt Validation
Yup, the very first step for all consumers dealing with medical collections is to request debt validation. Essentially, when we request debt validation on our account, we’re saying hey collection agency, you first prove this is, in fact, my debt and you’re the legal rights holder.
It’s most effective to make this request in writing, and send it using certified mail, with return receipt requested. This way you’ll have evidence you made your validation request, and they received it.
You see, the collection agency must respond by providing you with the paperwork, documents, and evidence that does prove this is your debt. This paperwork will show all the details related to the debt such as date of last account activity, the total balance, who the original medical provider was, and much more.
If they fail to validate your debt, then in compliance with the FDCPA, you’re no longer legally responsible for payment. In other words, the debt is legally forgiven. Further, they’re supposed to contact all three credit bureaus to have them go about removing medical bills from credit report files, regarding this debt.
2. How Old Is The Medical Debt?
If they do validate your debt, we next need to review the paperwork they send us. We’re specifically looking for your last date of account activity.
You see, every state has passed what’s called the statute of limitations. This state legislation says precisely how long you’re legally responsible for repayment of a debt. And it does vary by state, so check out your local legislation for exact details.
Generally, this legal time-window is about seven years from the first date of delinquency. Once this time-window runs out and expires, so does your legal obligation to make payment.
The statute of limitations applies to medical bill collections, it also governs most other types of consumer debts including: charge offs, retail, telecommunications, utilities, credit cards, and many more. The few exceptions are federal defaulted student loans, and federal income tax.
Warning. Debt collectors, especially late-stage debt collectors are notorious for re-aging consumer accounts. Often this is done illegally, and with the obvious purpose of continuing to try and collect payment.
3. How To Pay Collections
If your account is within the statute of limitations legal time-window, and it’s been validated, our next step is to share how to pay collections and so it will improve your credit score. It’s best to create a settlement agreement in writing, directly with this collection agency.
There’s two parts to this agreement. First, we need to negotiate and settle to pay this medical collection for just a fraction of the total balance. Remember, the balance has likely been inflated with high-interest, and collection fees.
Frequently, you’ll be able to negotiate to pay as little as 15% up to about 45% of the total balance. For example, with a $1,000 debt, you may be able to pay just 30% or $300. This is standard operating procedure.
The second part of your agreement is mission critical. We must get the collection agency to agree that in exchange for our payment, they’ll stop reporting our account information to all three credit bureaus.
You may have heard about a popular internet practice of dealing with debt collectors by using a pay-for-delete approach? If you’re unfamiliar, this is where you first demand the debt collector delete the negative item on your credit reports, and then you’ll make payment.
It sounds terrific. And we’d encourage you to do it, if it worked, or was even plausible. You’re still welcome to try this approach, but please, don’t hold your breath.
For many reasons, debt collectors won’t ever make this agreement. Despite seeing it written about all over the internet. It’s more likely we’ll see PETA opening butcher shops on every street corner in America.
Instead, it’s much more pragmatic, and effective to get them to agree to just stop reporting your account information to all three credit bureaus, in exchange for your payment. This they will agree to, albeit sometimes reluctantly.
4. How To Remove Medical Collections From Credit Report
Our final step is sharing how to remove medical collections from credit report files, because this is how to get better credit. We’re going to need to use more of your consumer rights, this time those granted by the Fair Credit Reporting Act (FCRA).
This federal legislation enables us to dispute and challenge any item on our credit reports, so long as we believe the item is incorrect, misleading, or made in error. And we’re going to dispute medical collections on your credit reports.
If this medical collection is on all three of your credit reports with Experian, Equifax, and TransUnion. You’re going to need to file three separate credit report disputes, one with each credit bureau.
There’s three ways to file your credit report dispute online, over the phone, and by mail. Once the credit bureaus get your dispute, they first get to deem it frivolous or valid. And that’s another conversation for another time and place, so make sure to sign up for our free newsletter for more credit restoration tips with Dan Willis, and join our congregation.
Once the credit bureaus find your dispute valid, they’re required to investigate the item. They’ll call it a re-investigation. Nevertheless, they’ll contact the collection agency and ask them to verify your account.
As per your settlement agreement with the collection agency, they won’t verify your account when the credit bureaus investigate the item. That’s the second part of your settlement agreement.
This means, in accordance with the FCRA this item must be removed from your credit report. This is how to remove medical collections from credit report files legally, and by exercising your consumer rights. And long before you just sit on your hands and suffer the expense, embarrassment, and frustration of living in a brave new world with a bad credit score.
Look, it’s not an easy path dealing with debt collectors. Nor living with a less-than-perfect credit score. There are many laws, and technical legalese that is needed to most effectively deal with medical bill collections.
Many people, feel like they’re living in ancient biblical times as David going into battle with Goliath. And you’re telling me all I get is this lousy sling-shot and a couple of rocks. Come on, man!
At the end of the day, your credit score is a lot like your Grade Point Average (GPA) in glory school days past. It doesn’t matter if you’re acing all your courses, if you’re failing The Art of Walking, because this negative mark is going to ruin your overall GPA.
This is also true of your credit score. And this is why it’s of such paramount importance to clean up credit report dings, blemishes, and remove any negative items.
We encourage our members to consider professional, legal, and legitimate credit repair companies to help. Because in 2016 alone, over 9 million negative items were removed from consumer’s credit reports.
One of the best firms is The Credit Pros. They’ve helped their client’s successfully remove medical bill collections, late payments, charge offs, judgements, liens, and many more negative credit report items.
Get a free credit consultation with a certified FICO professional by calling toll-free 1-877-418-7596. And for more tips, techniques, and strategies about how to get your credit score up with Dan Willis, sign up for our free newsletter and join our congregation.
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