When credit reports are bad for your health

What do you get when you cross health insurers with the medical establishment?

What do you get when you cross health insurers with the medical establishment? Quite often, the result is a serious fiscal headache, which is just what happened to one InvestmentNews reader.

The adviser, whom I’ll call Mary, called to thank me for a column I had written a few months ago that said everyone could benefit from an annual fiscal checkup. I had urged advisers to push clients to request a credit report once a year to keep tabs on their consumer credit scores.

After reading the column, Mary decided to check her own credit report. She shared the results because she felt that it would serve as a lesson to other financial advisers who may have clients in a similar situation.

Mary was shocked when she received her report, because her credit score was much lower than she had expected. It seems that about 18 months ago, Mary’s insurance company and her medical provider were negotiating payment for some bills that amounted to roughly $8,500. Of course, because Mary has insurance and faith in the system, she believed that her insurers and medical providers had come to an agreement and resolved the issue.

While that was a fair assumption, it was not accurate. Neither the insurance company nor the hospital followed through; the medical bills became delinquent, then overdue, and then were sent to a collection agency.

As a financial professional, Mary worked through the problem and eventually got the medical bills paid. That’s a happy ending, right?

Wrong.

Mary discovered that a medical collection record can stay on your credit report for up to seven years if you fail to prove that it was an error. For the record, unpaid medical bills will not go on your credit report unless they are turned over to a collection agency — which definitely will report the debt as delinquent to one or more of the three major credit bureaus.

Once a medical collection shows up on your credit report, you can dispute it, explain it or just ignore it.

To dispute the ding, you have to prove that it was erroneous in fact, such as due to a clerical error. If the factual error can be proven, the credit-reporting service will delete the entry. If the problem was the result of non-payment by your insurer, you have the right to explain it on a consumer statement that the reporting agency will attach to your credit report.

If you dispute the validity of the debt within 30 days of being notified that you owe it, a creditor or debt collector cannot place the amount owed on your credit report without a notation that you dispute owing it.

Mary disputed the collection record on her credit report and proved that the medical bill was sent to a collection agency unlawfully, meaning that she was never billed directly for the amount due prior to it being sent for collection.

“People who haven’t checked their credit reports in a while are going to be in for a shock,” she said.