It’s a double whammy. Not only did you have some sort of illness or injury, but you also have gotten smacked with medical bills on your credit report. This is causing you to have a less-than-perfect credit score, and talk about a rocky road to recovery.
There’s much ado about politics and healthcare these days. Let us set aside our personal feelings, and look at things objectively, before we get into the meat and potatoes of this article and how to remove medical bills from credit report files.
According to the Consumer Financial Protection Bureau (CPFB), over 43 million American’s have medical debt. Long before and long after our current healthcare debate, medical debt has and continues to be the leading cause for people to file bankruptcy.
This author had a brain aneurysm rupture and subsequent surgery. Medical bills accumulate super fast. And digging yourself out of a substantial financial hole, with or without insurance, can feel like your climbing Mount Everest, and all by yourself.
Debt in collections is the most common type of bad credit, it’s said that over 52% of collections are for medical bills. Moreover, one collection agency CEO says that around 20% of the medical bills his firm collect on, have errors. In other words, these debts are rarely accurate and correct.
This translates into hope! While it’s true the maximum amount of time medical bills can stay on your credit reports is seven years, there is no minimum amount of time medical bills must stay on your credit reports.
Let us repeat, there is no minimum amount of time medical bills must stay on your credit reports. In fact, every single day, people successfully remove medical bills from credit report files, by exercising their consumer rights, and as such improve credit score information.
There’s a number of ways to remove medical bills from credit report files, and naturally, this will depend directly on your unique circumstances. For our purposes here, we’re going to start at the beginning and first discuss current medical bills in collections, and then how to clear credit history of these derogatory items.
Medical Bill Collections
Instinctively we want to believe if we just pay off collection debt, this will fix credit score information. It makes sense. However, it’s far from accurate.
Just paying off collections is only going to change the status of the item on your credit reports, to a paid collection. This is still a negative item, that’s going to damage your credit score. FICO (Fair Issac Corporation) says: “The fact that you have collections listed on your credit report will almost certainly lower your FICO score.”
And go on to say: “As far as your FICO score is concerned, two things are considered; has a collection appeared on your credit report, and when it was reported. So whether or not you pay your collections off is really a personal decision.”
For the uninitiated FICO is the company that actually calculates the majority of consumer credit scores. Further, Anthony Sprauve, a spokesman for FICO, says collections on your credit report can damage and drag your score down by up to 100 points.
While the Experian credit bureau says: “Paying the debt won’t necessarily help your credit scores. Accounts that get to the collection stage are about as negative as it gets. Only bankruptcy is worse. As a result, any improvement, especially right away, probably will be very minor.”
What does all this mean? Simply put, it’s mission critical to remove medical bills from credit report files entirely. It doesn’t make a huge difference if the medical bill is paid or unpaid, if it’s on our credit reports, we’re going to have a less-than-perfect credit score.
That said, paying off debt in collections, when done properly with the due diligence performed that will be sharing in a moment, can be an effective way to remove medical bills from credit report files. But, we do need to share the potential consequences of unpaid medical bills.
Collection Tactics For Unpaid Medical Bills
In addition to the phone calls, threatening letters, you’re also going to have negative information reported about this account on all three of your credit reports. If this collection agency isn’t able to collect payment, they can turn around and sell the rights to your account, to yet another collection agency.
This new debt collector will start calling you, send more demanding letters, and report even more negative information on your credit reports. And most often with unpaid medical bills, you’ll be sued in a civil court.
In other words, one of these late stage collection agencies with in-house attorneys that specialize in suing consumers will purchase the rights to your account and sue you. You should be notified of an upcoming court date with a summons.
It’s wise to appear, even if you don’t have the financial wherewithal to make payment today, tomorrow, or even five years from now. If the collection agency wins their case, they’ll be awarded a judgement against you.
This can result in wage garnishment, liens being placed against you and or your property, and even asset seizure. The worst part is a credit judgement will destroy your credit score, and virtually overnight. Please, investigate your local legislation for further details because each state has unique laws.
3 Steps For Medical Bills In Collections
1. Request Debt Validation
The very first step for dealing with medical bills in collections, is to request debt validation on your account. This your right granted by the Fair Debt Collection Practices Act (FDCPA).
It’s most effective to make your validation request in writing, and using certified mail with return receipt requested. This way you’ll have evidence they, in fact, did receive your debt validation request.
You see, they’re required to respond by furnishing you with the documents, and paperwork that proves this is your debt. This paperwork should also show detailed information about the account including who the original debt occurred with. For instance the specific hospital, doctor’s office, etc. Along with the balance, dates of account activity, and more.
If they fail to validate your medical debt, then in accordance with the law, the debt is forgiven. As in you’re no longer legally responsible for payment. Further, they’re supposed to contact all three credit bureaus to have them start removing medical bills from credit reports, concerning this account.
Essentially when you request debt validation, you’re saying prove this is my account. After all, you didn’t do any business directly with any collection agency, they got access to your information, prior you probably didn’t even know this company existed.
2. Statute of Limitations
Listen, medical bills are governed by the statute of limitations. This is state law, so please investigate your local listings because it does vary from state to state, and this legislation says how long you’re legally responsible for payment of a debt.
Generally, it’s about seven years from the first date of delinquency. This first date of delinquency, often occurs with the original lender or creditor, and for our purposes here, that would be with the hospital or doctor’s office. Not with the collection agency, most times.
Once this time window expires, then the debt is legally forgiven. The statute of limitations doesn’t apply to every type of consumer debt, however, it very clearly and definitely applies to medical debt.
On a sidebar, it also applies to credit cards, charge off accounts, utilities, retail, automotive, and many more. The few types of consumer debt exempt from this time window are defaulted federal student loans, and federal income taxes.
Warning, collection agencies frequently will re-age consumer accounts, and often do so illegally. They’ve been fined by the Federal Trade Commission (FTC) for violating consumer rights by illegally re-aging consumer accounts, along with many other fines for their aggressive and often illegal behavior.
3. Negotiate a Settlement Agreement
If your account is valid, and within the legal time window, the next step is to negotiate a settlement agreement directly with the collection agency. There are two important parts of your agreement.
First always negotiate, so you’ll be paying off debt in collections for just a fraction of the balance. Typically you’ll be able to settle your debt for somewhere in the ballpark of 15% up to 45% of the total balance.
For example with a $1,000 debt, you may be able to settle for just 20% or $200. This is standard operating procedure and collection agencies will readily and happily agree to a settlement for less. Generally, the older your account gets, the less you’ll be responsible for paying.
The second part of your agreement is you must get this collection agency to agree that in exchange for your payment, they’ll stop reporting your account information to all three credit bureaus. You may have heard, read, or been told this is where you demand the collection agency delete the item from your credit reports.
This is what so-called internet credit experts advise, but we can rest assured they don’t have a clue. And have never suffered from medical bills in collections, or even less-than-perfect credit.
They’re much like college professors, living in these fantasy lands of theory and the way things should be. Because we’ve yet, in our decade-plus of working with folks and our own credit trials, have experienced even one collection agency agreeing to delete items in exchange for payment.
It’s a small and subtle difference, and is frequently the difference between success and failure. We strongly encourage you to request they simply stop reporting your account information to the credit bureaus. This is how to pay off debt in collections, and most effectively.
After all, you don’t exactly sound reasonable demanding they delete an item for payment. They won’t do it, either, it sets a dangerous precedent. Moreover, most credit card issuers, aren’t willing to delete even late payment marks from their current cardholders, and current customers credit reports.
How To Remove Medical Bills From Credit Report
Now that you’ve settled your medical debt, or may have prior to reading this article, we can get into the meat and potatoes and discuss precisely how to remove medical bills from credit report files. To do this, we’re going to use more of your rights as a consumer and specifically those granted by the Fair Credit Reporting Act (FCRA).
This federal legislation gives you the right to challenge and dispute credit report items, so long as you believe they’re inaccurate, misleading, or made in error. As you’ve probably guessed, we’re going to dispute medical bills on credit report files.
You can file your credit report dispute online, over the phone, or by mail. Once the credit bureaus get your dispute, and deem it valid, which is another conversation for another time and place, so sign up for our free newsletter for more credit score help and join our congregation.
Once the credit bureau gets your dispute and deems it valid, they’re required to investigate the item. During which they’re going to contact the collection agency and request verification of the account, and the details such as dates, balance, etc.
As per your settlement agreement, your account isn’t going to be verified with the credit bureaus investigation. And in accordance with the FCRA, the credit bureaus must remove items that can’t be verified or substantiated. This is how to remove medical collections from credit report files, and medical bills, and do so legally.
There are two last caveats, the first is by paying off debt in collections, you eliminate the need for a debt collector to verify your account with the credit bureaus. There is nothing left for anyone to get from the account, it’s been paid, and to verify it during a credit bureau investigation is only an expense for the debt collector.
This is why it can be very effective to settle and pay off debt in collections, to most effectively and efficiently clear bad credit items from your credit file. If the account was unpaid, there would be an incentive for the collection agency to verify it during the credit bureau investigation.
The second caveat, is today due to amendments made to the FCRA, you can now dispute the data furnisher directly. In this case, that would be disputing the collection agency, hospital, doctor’s office directly and bypassing the credit bureaus.
This would be ideal if you disagree or dispute the actual debt and services performed. For instance, you believe there was a clerical error because you never had brain surgery but are being billed for it.
The truth is this amendment we believe is a result of big business influence and lobbyists on our dishonest politicians. Because it really only complicates matters, and makes what’s already a very unfriendly credit dispute process, even more, unclear for the everyday American.
There haven been small changes over the years, the first being that Equifax, Experian, and TransUnion have all agreed to wait 180 days before including medical bills on credit report files. Along with agreeing to promptly remove medical bills from credit report files, if your insurance company ultimately pays the debt.
FICO and the VantageScore, a lesser known and used credit scoring model, have taken precautions for medical debt. FICO says their newest credit scoring model: “FICO® Score 9 differentiates unpaid medical accounts in collections from unpaid non-medical accounts in collections. FICO’s research found that unpaid medical accounts were less indicative of credit risk than unpaid non-medical accounts.”
FICO 9 makes a few additional changes, but the glaring, overwhelming, and continued problem is virtually no banks, lenders, or creditors are using the FICO 9 scoring model. Most of them continue to use the FICO 8 model, have their own scoring algorithm, or use an even earlier version than the FICO 8 model.
Chances are you, your life, and your family can’t just sit on your hands and wait for these institutions to pony up more cash to FICO, so they can get the latest scoring model. Nor should you!
Look, your credit score is exactly like your Grade Point Average (GPA) in school days past. It doesn’t matter if you’re acing all your courses, if you’re failing The Art of Walking (a real college course, by the way). This one negative mark is going to ruin your overall GPA.
This applies even more to your credit score, your FICO score, VantageScore, and even industry credit scores. This is why we must clean up credit report dings, blemishes, and remove any negative items from your credit reports.
We encourage our members to consider professional, legal, and legitimate credit repair companies to help with this. 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 client’s successfully remove medical bills, 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 improve credit score with Dan Willis, sign up for our free newsletter and join our congregation.
Get a FREE Credit Consultation