A reader is in a fight with their insurance company but worried their credit score may get popped in the meantime.

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I received a notice about a medical bill that got sent to a debt collector, even though I swore my insurance had paid it. When I looked into it I found out that the claim was denied. I’m appealing, but how does it affect my credit since it’s already been sent to a collection agency?

Agnes in Denver, CO

Credit expert Gerri Detweiler responds…

You’re right to be concerned about how this medical debt may affect your credit reports. Over half of all collection accounts on credit reports are due to medical bills, according to the Consumer Financial Protection Bureau. Collection accounts can lower your credit scores significantly (30-70 points or more) and remain on credit reports 7.5 years from the date the bill was missed with the original creditor.

How medical collections affects your credit report

Depending on how old this bill is, the collection account may not yet appear on your credit reports. The major credit reporting agencies won’t include medical debts that are less than 180 days past due (from the date of service). For the most part, that time period gives consumers time to resolve medical billing issues or to work out payment arrangements with providers.

The only way to know is to check your credit reports with all three major credit reporting agencies, Equifax, Experian and TransUnion, which you can do for free at Annualcreditreport.com. It’s a good idea to order a copy of your report with each of the major credit bureaus since some collection agencies don’t report to all three. In addition, it would be a good idea to monitor your credit scores with all three credit bureaus so you’ll be alerted to any changes. (Here are 138+ places to monitor your credit scores for free.)

How medical collections affect your credit score

Some consumers believe medical bills do not damage credit scores as much as other types of debt but that’s not entirely true. Some of the newer credit scoring models do treat certain collection accounts differently. Credit scores created using FICO 9 or VantageScore 3.0 and 4.0, will weigh medical debt differently than other types of debt, but it’s not ignored completely.

In addition, those scoring models will ignore collection accounts that have been paid if the credit report lists no balance due. The problem is that many lenders use older FICO credit scoring models that don’t have these features built-in. For that reason, you want to try to get (or keep) this collection account off your credit reports if possible.

How to deal with the medical collection agency

If this debt does not yet appear on your credit reports, ask the collection agency what needs to happen to keep it from being reported. It may be willing to agree not to report it if you pay the full amount right away. (If the collector does agree to this, make sure you get it in writing.) You could then pay it, assuming you can afford to do so, appeal the insurance decision and ask your insurance company to reimburse you rather than the provider if it decides to pay some or all of the bill.

Tip: If you have employer-based health insurance, ask your employer to put you in touch with an insurance representative who may be able to assist you with the appeal. 

If it has been more than six months since you received the medical services, you may find a collection account on your credit reports. If that’s the case, you can still try to work with the collection agency. Let the collector know you are appealing the insurance decision and ask what your options are to get this account off your credit reports while you wait for the insurance company to process the appeal. It may be willing to suspend reporting during this time. (It’s a good idea to follow up any conversations in writing, describing what was agreed. Send correspondence with tracking and keep a copy for your records.)

If it is unwilling to do this, you can still dispute the item on your credit reports. Under the Fair Credit Reporting Act, you have the right to dispute information on your credit reports directly with each credit reporting agency that is reporting it. (It’s a good idea to file your dispute in writing as mentioned before.)

That should buy you some time while you appeal it. If the insurance company does agree later to pay it, you should then be able to get it removed from your credit reports permanently. If your insurance company refuses to change its decision, it’s possible the account will continue to be reported as a collection account after the dispute has been investigated.

Finally, you may want to check with your state insurance commission to find out if there are state laws that provide further protection. States such as Nevada and Maryland have recently passed consumer-friendly legislation that provides additional protections for residents dealing with medical bills. It’s worth checking whether your state has any laws that may help you resolve this debt.

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About the Author

Gerri Detweiler

Gerri Detweiler

Gerri Detweiler has been helping consumers find answers to credit questions for two decades. As a noted expert on credit issues, she has appeared on The Today Show and Dateline NBC as well as given advice to The New York Times, USA Today and Reader's Digest.

Published by Debt.com, LLC