Check your credit report for unpaid medical bills

We expect a late car payment to bring down a credit score a few notches. We accept that a maxed-out credit card won't look good on a credit report. But what a shock to find medical bills sent to collection on your credit report, especially if it's the first time you've seen them.

An estimated 14 million Americans are dealing with medical bills they believe have been sent to collection agencies in error (The New York Times Dec. 17).

Darryle Watson of Willow Park, Texas, first learned of his outstanding bills when he and his wife attempted to refinance their mortgage. Despite a solid record of paying back credit on time, their low credit scores would cost them more than $9,000 in closing costs. Four unpaid medical bills, the largest only $400, had gone directly to collection.

Hospitals, labs, and physicians are more likely to sell unpaid medical bills to collection agencies for just pennies on the dollar, avoiding the rules and regulations of creditors who report unpaid debts.

"Collections are weighted more heavily than other unpaid or late bills," said Rod Griffin, director of public education at credit reporting agency Experian. "They will have a more serious effect on your credit score. This can stain a credit report for seven years, even after the bill is paid. Pending federal legislation would require paid medical debt to be removed from credit reports after 45 days.

Follow this prescription to monitor the effect of medical bills on your credit score:

• Order a free credit report. Medical bills are sometimes sent months after service; it can be difficult to decipher what portion is still unpaid. Play it safe and review your credit report at least annually. You can get a free report from each of the three major reporting agencies at annualcreditreport.com. Order from one agency in January, another in May, and the third in September for thorough monitoring.
• Dispute errors in writing. If you find an unpaid medical bill on your credit report, send documentation showing payment to all three major bureaus. The Federal Trade Commission's website offers guidelines for disputing errors.
• Negotiate payment. Even if it's the first time you've seen the bill, work with the collection agency. If it's a legitimate charge for which you are responsible, secure a promise in writing to remove the bill from your credit report if you pay.