collection agencies

How to fight a medical collection

October 8, 2012 By Liz Weston

Dear Liz: My credit score just dropped more than 100 points within 45 days. The only thing I can think of that might have caused it is a $46 medical bill that was paid by my flexible spending account. I have a confirmation that the bill was paid, but for some reason the bill went to a collection agency. How do I get my credit score back to 828? I just recently moved and need a good credit rating for numerous reasons, especially purchasing a home and a new car. I was just turned down for a credit card from the bank that holds my mortgage. I tried dealing with the original medical office that received my payment, but they said I have to talk to the collection agency.

Answer: Check first to see if the collection account is actually on your credit reports. Go to http://www.annualcreditreport.com, the only site that offers you free, federally mandated annual access to your credit files at the three major credit bureaus. Other sites may advertise “free” credit reports, but they often come with strings attached such as requirements that you sign up for credit monitoring. Sites that offer free scores typically aren’t providing the FICO scores that most lenders use.

If the collection account isn’t on your reports, something else may have caused the score plunge. Consider buying at least one of your FICO scores from MyFico.com, which will give you an explanation of why your score isn’t higher.

If you find the collection account on your records, however, you need to go back to the medical billing office and insist that someone fix this, said Gerri Detweiler, a credit expert for Credit.com.

“The bill did not magically turn up in collections,” Detweiler said. “Someone made a mistake and since it is their office that was the source of the mistake, they need to fix it.”

Detweiler recommends sending a certified letter explaining that the office has damaged your credit reports and that if someone doesn’t fix the mistake immediately, you will be talking to an attorney about a credit damage lawsuit.

“If the medical office placed it for collections, they can pull it back from collections,” Detweiler said. “It sounds like they are being lazy by refusing to help.”

If the office balks for any reason, you can follow up with an attorney (you can get referrals from the National Assn. of Consumer Advocates at http://www.naca.net). You also can send a certified letter to the collection agency explaining the mistake and insisting it be removed from your credit reports.

You should mention in the letter that you’re trying to get a mortgage and a car loan and that if you’re unsuccessful because of this error, you’ll be talking with a consumer law attorney. It would be helpful to include proof of the mistake, Detweiler said. In many cases, the collection agency will simply delete the erroneous information rather than face getting sued.

“They may not want to bother with it since it’s such a small amount and not worth risking a lawsuit over,” Detweiler said.

Could son’s unpaid bills harm parents’ credit? Maybe

March 19, 2012 By Liz Weston

Dear Liz: Our 24-year-old son lives with us. He failed out of college, has been fired from two restaurant jobs and is working part time at a grocery warehouse. He has neglected to pay his credit card for several months. He also waits until his cellphone carrier threatens to turn off his phone before he pays half of that bill. We are concerned that his poor payment history may start to reflect on our good credit histories. We are retired and may want to build a new house. His bills are sent to our address, and creditors call our home phone number looking for him.

Answer: His debts shouldn’t affect your credit reports and scores unless you cosigned loans or other credit accounts or added him as a joint user to your credit cards.

Note the word “shouldn’t.” It’s possible that an unethical collection agency would try to get you to pay these bills by posting the overdue accounts on your credit reports. That could negatively affect your scores. Check your credit reports at least once a year at http://www.annualcreditreport.com. You also may want to consider ongoing credit monitoring, which can alert you if any collections or other suspicious activity shows up on your reports.

Speaking of unethical actions, you need to consider the possibility that your son could steal your financial identity. He probably has access to the information he would need to open new accounts in your name, including your Social Security numbers. His failure to pay his bills, even though it appears he can, indicates some moral shortcomings. He may not be low enough to rip off his parents, but if you have any suspicions about his trustworthiness, consider putting a credit freeze (also known as a security freeze) on your credit reports. This freeze should prevent anyone from opening credit accounts in your name.

Finally, you can write letters to creditors telling them to stop contacting you. You run the risk that such a letter could lead a creditor to sue your son. But his creditors may sue him anyway if he doesn’t respond to their requests for payment.

How to stop collection calls

March 5, 2012 By Liz Weston

Dear Liz: About six months ago a debt collection agency started contacting me, by phone and the occasional letter, claiming that I have a past debt of about $20,000 that I owe to a bank card. I have never heard of this particular card or bank. I keep very accurate files, and I do not see this in my records. My credit scores hover around 720 to 740. How can I get them to stop contacting me?

Answer: If you don’t owe this money, send the collector a letter by certified mail, return receipt requested, stating that the debt isn’t yours and that you don’t want to be contacted again. It’s not unusual for a collection agency to dun the wrong person, and this may not be the end of it. Often, these poorly documented debts are resold, so you may have to tell the next collection agency the same thing.

If you did owe the money, you would want to tread more carefully. A collection agency would still have to honor a “do not contact me” letter, but sometimes these letters prompt the collectors to file lawsuits against debtors, said Gerri Detweiler, a credit expert with DebtCollectionAnswers.com. The collection agencies figure if they can’t negotiate payments with a borrower directly, they’ll use the court system to get the debtor to pay.