Mike and Linda thought their credit record was spotless. The Central Coast couple wanted to take advantage of low interest rates, so they put their house on the market and talked to a lender about a mortgage on a bigger home in the area.

Their credit report contained a shocker: A $300 medical bill had been sent to a collection agency. Although since paid, it still lowered their credit scores by about 100 points, and it means they’ll have to pay a discount point to get the best interest rate. Cost to them: $2,500.

Surprisingly, even if 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.

The hope is these proposed tougher laws would prevent medical bills from even being reported on credit reports. Until then however, it behooves consumers who have medical collections on their credit profile to be proactive.

Begin by contacting the collection agency to see if payment will result in the derogatory entry being removed.  If this is agreed to, make certain the agreement is in writing.  Otherwise the collector will happily take your money and leave the mark on your report, which is what typically happens.

If the collector is not cooperative or if the medical bill was already paid but is still on your credit profile, you may have to fight fire with fire. It is illegal to list a bill that had been paid as outstanding.  Additionally, if the collection agency cannot verify the debt or in some other way violate state and federal guidelines, you will need assistance in removing the item from your credit report.

The team at Heritage Credit Group is trained to recognize these violations, and bring it to the attention of our legal department.  This usually results in the derogatory entry being removed and a cash award for the consumer as well.

To learn more about this please see “Debt & Collections” here