Hospitals, Bills, Collection Agencies, & Ruined Credit Scores


Did you now that even the most minute unpaid medical bill can ruin a person’s credit score?

“…Surprisingly, even after the bills have been paid off, the record of the collection action can stay on a credit report for up to seven years, dragging down credit scores and driving up the cost of financing a home. An estimated 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 small copayments 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 copayment on a PET scan Mike needed had been sent to a collection agency….”

Most regular readers of The Pink Flamingo are aware that I’ve taken over most of my parents day to day financial dealings such as banking, bill paying, and (oh joy) dealing with insurance. One of the most funnest parts of dealing with this is insurance, medicare, hospitals, and bills.

Then there are the bill collectors.  I’ve been getting letters from a credit agency dealing for my mother.  I’ve been tossing them. I’m paying the bills and I know that everything has been paid.

“…Sometimes those bills can lower your score, even if you pay them off. Medical bills can and do impact credit scores. Many people do not even realize there is a problem with a medical bill on their credit report until they buy a house or refinance.

Lwanda Mikulenka knows what it’s like to get an unexpected medical bill, after suffering an accident at home last year. She said, “I got a bill for the ambulance, even though I didn’t go anywhere. I refused service from them and they still sent me a bill and I called them five months later and said, ‘Why am I getting a bill for an ambulance I never used?'”

Mikulenka says that bill is taken care of by insurance, but financial experts say if there is an issue, that bill could be turned over to collections and ultimately could end up hurting Mikulenka’s credit score. And she is not alone.

Tanisha Warner with Money Management International explained, “A lot of people do not know that medical debt is debt that can hurt your credit.” Warner says medical bills are fast becoming major factors in credit scorers. “A lot of people are finding themselves in really hard times as it relates to their credit score, because of the medical issues,” Warner said. Warner says medical bills generally get sent to a collections agency faster than typical bills. She added, “You could actually go to the doctor and 30 days later or 60 days later you could find this is impacting your credit score.”…”

About three weeks ago I had a letter from Capital One stating that my mother’s main Visa, with a large limit, had been flagged because of a report from a credit agency.  There was an unpaid bill.  They’d cut her limit in half.

I didn’t think much about it.  Her credit limit was way too high.  I wanted it cut in half.  We’d had some problems waiting for a major land payment back in the fall.  I was able to muddle through things, and keep every thing on track.   The only victim was my father’s Target account.  He used it, constantly, even when I asked him not to do so.  It was an Alzheimer’s moment.  So, the card is dead as a doornail.

But – this was a bit different.

I knew there was a billing screw-up between my mother’s primary care physician, hospital billing, and United Healthcare.  On the bills coming from Presbyterian Hospital, she was listed as having neither Medicare or insurance.  Having read the two articles above, I was careful to pay the $512.00 bill, then call United to find out what was going on.

Her supplement was fine.  In fact, I’d screwed up payments, paying hers 5 months in advance.

She checked with accounting in her doctor’s office.  They’d had a screw-up with some of their accounting.  Knowing it was a screw-up, I realized I could take my own good time calling hospital billing about it.  I knew there would be a credit of at least five hundred bucks.

Then I opened the letter from the collection agency for $44.00.  It dated back to October.  I knew everything was up to date, so I pulled out my old records.  The name on the October bill was different from her regular billing.  It also had a different account number.

I called billing.

Fortunately, I managed to get hold of the nicest person, who worked for nearly an hour with me, United, and someone from Medicare.  They owe my mother $510.00.  The bill that was in the collection agency had been re-called.

I told him about how they were ruining credit scores.  He assured me this would not be the case.  Fortunately, I have everything on paper.

We all know the next fight is to get the matter cleared up with the credit agencies – $44 bucks that should never have been billed, let alone sent to a collection agency.

Fortunately, I don’t need to worry about vulture collection agencies working at the hospital we use.  But, this too is a cautionary tale.

Raw Story

FYI:  I learned another rule of thumb.  If Medicare covers something, so will your supplement.  If it doesn’t, don’t look for your supplement to pick it up.  I know, now, that United doesn’t.

We won’t even discuss the mess now with prescriptions.  Oye!