Problem with derogatory remark

First let me premise this by stating I have never had a problem with my credit, always paid bills, on time and never missed a payment. I have always checked my score and according to credit karma had credit in the mid 720's.

I recently applied for a letter of preapproval for a mortage. I then found out I had a derogatory mark for a unpaid medical bill for $17.55 from 2012. I had no knowledge of this and had never received a bill or notification of this debt. I contacted the company and they said they sent out a bill and I never paid. But I didn't ever receive a bill obviously i would of paid it is was so tiny.

But now my credit is apparently 676 according to their report and the loan would be a substantially higher rate.

I dont know what to do. Is there anything I can do?