How $5 could ruin your credit score

[kwillia]

"In the fall of 2008, I got a flu shot at my doctor's office. A few weeks later, I got billed $5 for my co-pay on a 'blood draw' on that date. I procrastinated a bit on calling in to ask my doctor's office to fix what was probably just a miscoded procedure. Eventually I called and went through the usual ordeal of explaining the situation to person after person before finding the one who said they could take care of it.

"In the fall of 2009, I got a notice from a collection agency that my doctor's office had turned over a $5 unpaid bill for collection. I racked my brain for another bill that might have fallen through the cracks and couldn't come up with anything but the co-pay. So, there I was, looking at this collection notice and remembering the time spent on the phone the first time around, and I decided $5 wasn't worth the hassle. I mailed a check to the collection agency.

"Fast-forward a few months, when my fiancé and I decided to really get into discussing our finances in preparation for merging them after we got married. I told him about AnnualCreditReport.com, and how I like to review my credit report every few months. I hadn't checked it in a while, so we thought we should get our reports and pay for credit scores, too. And then I nearly fell off my chair when I saw that because the $5 medical bill had been reported by the collection agency, my score had dropped from 785 to 689! I was shocked: $5 = 96 points?! Boy, did I ever regret my decision to avoid the minor hassle of a phone call to straighten out the billing error.

How $5 ruined my credit score - credit rating - MSN Money

 

[libertytyranny]

I thought medical bills weren't supposed to affect your score? that kinda sucks.

 

[Chasey_Lane]

I thought medical bills weren't supposed to affect your score? that kinda sucks.

Anything negative on your credit report adversely affects your score, even medical bills.

 

[kwillia]

I thought medical bills weren't supposed to affect your score? that kinda sucks.

Misconceptions
When you receive a medical bill, it is not usually reported to the credit bureau. Once you become past due, then the hospital will report your account as past due.

Significance
When medical bills are reported to the credit bureau, they can affect your credit score by decreasing it. Medical bills will show up as a collection account or as a bad debt.

The amount that your credit score is decreased will depend on other circumstances. If your credit file is 10 or 15 years old and you have a lot of other credit that is paid on time, the medical bill will not lower your score by much.

Effects
The exact amount that your score is lowered will vary from consumer to consumer. Other things that are considered are the type of credit accounts you have and how much debt you have.

Time Frame
If medical bills are reported to the credit bureau, they will remain on your file for seven years. The longer they are on your file, the less of an impact they have on your credit score.

Prevention/Solution
If you have no other credit except a medical bill collection, your credit score will be seriously affected. The reduction could be significant.



Read more: Do Medical Bills Affect Your Credit Score? | eHow.com Do Medical Bills Affect Your Credit Score? | eHow.com

 

[Chasey_Lane]

I don't believe for one second that a $5 delinquent debt caused the person's credit score to drop 96 points. I'm sure it affected his score, but not from this single incident. There must have been something else along the way to affect his score. The guy even said himself he hadn't checked his credit score in a while.

 

[lovinmaryland]

Anything negative on your credit report adversely affects your score, even medical bills.

When trying to straighten up our credit a few years back our loan officer told us medical bills were not taken into account when making large purchases (vehs, homes, boats, etc) Actually told us to ignore them.

 

[kwillia]

When trying to straighten up our credit a few years back our loan officer told us medical bills were not taken into account when making large purchases (vehs, homes, boats, etc) Actually told us to ignore them.

I found this on another link:


Considerations
Although medical debts can appear on your credit report and hurt your credit score, not all lenders view them the same way. While some lenders and creditors pull only your credit score, some, such as mortgage lenders, pull both your credit score and credit report. Credit.com quotes Lyndal McLaughlin of Fairway Independent Mortgage as stating that some mortgage underwriters do not place as much importance on medical collections when reviewing mortgage applications. Thus, although a medical collection may damage your credit score, it may not damage your chances of getting approved for a mortgage.

Warning
While a small medical debt may not affect your credit score, not paying the debt can result in a lawsuit from the collection agency. If you do not appear in court with a solid defense against the lawsuit, the judge may award a judgment in the collection agency's favor. This judgment will then appear on your credit report. Judgments are public records which, like bankruptcies, can do catastrophic damage to your credit score.



Read more: How Do Medical Bills Affect Your Credit Score? | LIVESTRONG.COM

 

[getbent]

When trying to straighten up our credit a few years back our loan officer told us medical bills were not taken into account when making large purchases (vehs, homes, boats, etc) Actually told us to ignore them.

That may depend on how many are in collections and/or how large, $$ wise, the debt is. I can't see them overlooking $1k or more in debt, even if it is medical.

 

[Chasey_Lane]

When trying to straighten up our credit a few years back our loan officer told us medical bills were not taken into account when making large purchases (vehs, homes, boats, etc) Actually told us to ignore them.

I was told the complete opposite by two mortgage lenders.

 

[Warron]

The only collection notice I ever recieved was from a medical company at St. Mary's Hospital for $1.29. And they never even sent me a bill, just sent it straight to collection. As far as I know, it did not impact my credit score though.

 

[lovinmaryland]

That may depend on how many are in collections and/or how large, $$ wise, the debt is. I can't see them overlooking $1k or more in debt, even if it is medical.

This was like 3 or 4 seperate things totallying roughly $2k

I was told the complete opposite by two mortgage lenders.

Well it worked

 

[MMM_donuts]

When trying to straighten up our credit a few years back our loan officer told us medical bills were not taken into account when making large purchases (vehs, homes, boats, etc) Actually told us to ignore them.

I used to work as a loan officer for Navy Federal Credit Union. We always excluded medical debt from our decision making, regardless of the amount.

 

[lovinmaryland]

I used to work as a loan officer for Navy Federal Credit Union. We always excluded medical debt from our decision making, regardless of the amount.

Told you I was right