My client has a medical collection of $80 for 1 month on his credit report. It dinged his FICO more than 120 points! Mortgage folks-advice, please?

Asked by Liz Hoffman, Daphne, AL Thu Oct 21, 2010

My client had a score in the 760 range when this occurred. He recently divorced and moved. A hospital stay prior to the divorce resulted in this bill. He had no idea he owed this because it was from lab tests from an outside lab and his ex never forwarded the bill to him. No help from the billing company, they weren't willing to write it off, but now he is hesitant to move forward with a home sale because the credit issue is keeping him from getting the best rate that he might have obtained with the higher score. Everything else is impeccable. I appreciate any input that I might pass on to my client. He doesn't want to have a mortgage person pull his credit because he's afraid it will knock his numbers down even further before he knows how to fix this.

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Larry Hunter’s answer
Larry Hunter, , Fairhope, AL
Fri Oct 12, 2012
Most mortgage brokers do not count medical collections, unless they are of an amount over $1,000. It is strange his credit decreased by the amount you stated. I always look on a client credit report to see when the debt last reported, if the collection is old, it is worse to pay it off. The brueau treats it as a more recent debt. I will be glad to talk to him and see if I can make the deal work now or what he should do to reapply in 90 days.
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Liz Hoffman, Agent, Daphne, AL
Fri Oct 22, 2010
Kyle-his combined scores prior to this negative collection item going on his credit report were 760. He has a credit monitoring service that he pays for through one of the three major credit bureaus. It monitors all three credit bureaus for key changes in his credit reports. He was notified there had been a change. When he looked at the change the only negative that had been reported was this medical bill. He looked within a day or two of the change. That is when he realized his credit score, which had been 760 the month before, had dropped to somewhere in the 630-640 range. The only change was this item. Any thoughts? Why did this hurt him this much?
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Kyle, , Scottsdale, AZ
Thu Oct 21, 2010
PS, what is the actual score?

I hope its not actually 730, and he thinks because its 150 less than the max 850 that the collection itself dropped him 120 points, because that would be completely false thinking.
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Kyle, , Scottsdale, AZ
Thu Oct 21, 2010
A collection like that will absolutely not affect a score that much, something else is off. My guess is a maxed out credit card - he needs to have a credit expert/mortgage officer pull a credit and go through it with a fine tooth comb.

Tell him the attitude of "I want to fix my score but dont pull credit on me" is like taking a car to the shop because its broken and not letting the mechanic open the hood. Not much can be done!

Plus normal credit pulls from shopping for a mortgage dont hurt your score in any real way AT ALL. Thats a myth. The fico formulas have been changed over the years to allow for that and not adversely affect a score for that.
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Liz Hoffman, Agent, Daphne, AL
Thu Oct 21, 2010
Thanks, Fred. He did that already and that is how he knows how much his credit score was reduced. And he did, in fact, owe the $80, which he paid as soon as he saw it on his credit report. He tried disputing it with all 3 agencies, and the answer came back that it was verified as a true debt. So my real question to any mortgage person who can answer is this: How much does a medical bill, that went into collections under these circumstances-and hurt his score this much, really count as far as obtaining the best rates on a mortgage. I have been told that medical debts are looked at differently.
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Fred Glick, Agent, Mountain View, CA
Thu Oct 21, 2010
Have him go to and go through all three credit bureaus and dispute the charge.

If the creditor does not answer in 30 days, it will be removed. They usually do not have anyone assigned to do this at small companies.

It will take some time, but it's the only way to do it and it is free! That website is provided by the 3 credit bureaus by the government so that all Americans can check their credit once a year.

Do NOT go to a credit cleaner-upper. This is a small thing to get done and he does not have to pay money to do it.

Good luck,

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