How To Minimize The Negative Impact Of Medical Bills On Your Credit Score
Everyone gets medical bills, and its not that uncommon for the bills to feel unaffordable. No matter how unpleasant the situation is, you cant ignore your medical bills. If left unaddressed, medical bills will impact your credit score and, therefore, your other lending opportunities.
Always communicate with your healthcare provider and insurer about your medical bills. If they send your bills to collections, youll know and be able to react accordingly. You have options to reduce the negative impact of medical bills on your credit score you just have to be proactive.
Lexington Law Firm provides professional services for credit repair. Our credit consultants can help you navigate your medical debt and work on your credit so you can have a strong financial future.
Reviewed by Shana Dawson Fish, Associate Attorney at Lexington Law Firm. by Lexington Law.
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Utilize A Medical Financing Card Or 0% Apr Credit Card
Some medical providers offer low-interest and no-interest financing options through a medical credit card like CareCredit. Keep in mind that these payment plans are typically offered through the original health care provider, not debt collectors. They also typically come with a high purchase APR if you don’t adhere to the payment agreement.
Alternatively, you could consider opening a new credit card with a 0% APR purchase period. This may allow you to repay your medical expenses without paying interest for a period of up to 21 months. It’s important to note that these offers are generally reserved for applicants with very good or excellent credit, defined by the FICO model as 740 or higher.
How Will All This Affect My Credit Score
Having a debt go to collections can drop your credit score significantly — and it gets worse the longer it hasn’t been paid. For instance, your credit score is likely to drop more if a bill has gone unpaid for 150 days versus 30 days. Once a collection has been removed from your credit report, you could see a positive change in your credit score.
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How Common Is Medical Debt
According to the Peterson-KFF Health System Tracker, 9% of adults about 23 million people owe a medical debt of $250 or more. About 1% of adults owe more than $10,000, and those bills represent most of the medical debt in the U.S.
As of June 2021, consumer credit records contained $88 billion in medical debt, according to the Consumer Financial Protection Bureau . Most of those debts were less than $500.
The total amount of medical debt in the U.S. very likely exceeds $88 billion, as not all medical debt that is unpaid or in collections is reported to the credit agencies.
There are some groups that are more likely to have medical debt, according to the CFPB. They include:
People with low incomes
How To Keep Medical Bills Off Your Credit Report
The good news is that in most situations, a little vigilance, knowledge and organization are all it takes to keep your medical bills from going to collections. Take these steps when you’re planning any doctor visit or medical procedure:
If you don’t have health insurance or your insurance doesn’t cover the visit or procedure, find out ahead of time how much you can expect to be charged. This is also a good time to find out if the health care provider offers any payment plans or accepts medical credit cards, such as CareCredit.
If you recently had a procedure or visited a doctor and haven’t received a bill, contact the health care provider to make sure they have your correct address and that you didn’t miss a bill. Do you receive bills by email? Make sure to add your providers to your email address book so their messages don’t get lost in your junk or spam folders.
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How Can Medical Debt Affect Someones Credit Score
If healthcare providers fail to collect the debt, they often send the account to a third-party collection agency, which then reports the unpaid balances to credit bureaus, according to CFPB.
But when someone uses a credit card to pay off a pricey medical bill, then struggles to pay off the balance afterward, it can still lower their credit scores dramatically.
A lot of people think of medical debt as debt owed to medical providers, Lunna Lopes, a senior survey analyst for the Kaiser Family Foundation Public Opinion and Survey Research team, told Verywell. But one thing that we should keep in mind is that a lot of people might pay their medical bill with their credit cardnow they owe the credit card.
This could lead to some patients being stuck in a vicious cycle ofpoor health and unaffordable care. Based on a 2019 survey by Peterson and KFF, people struggling with health problems and financial insecurity may also be most in need of medical care.
According to the survey, 38% of people with fair or poor health had medical debt. People who had lower household incomes were also more likely to owe medical debt.
How To Pay Medical Bills In Collections
If your bills are in collections and youve already attempted to negotiate or dispute them, there are steps you can take to pay off the debt.
- Request and review documentation. Before making payments, request written documentation of any bill that was sent to collections. Make sure what youre being charged is accurate . Ask for the items to be itemized so that the bill is easier to understand.
- Make a plan for your situation. If you can pay off a bill in full, do so. If not, create a plan to ensure you can pay it off quickly. Analyze your monthly income and expenses and figure out where you can cut back on spending. Decide how much you can afford to pay toward the bill each month, and begin making payments as soon as possible.
Set a budget for yourself for necessary expenses only, and put any extra funds toward paying off the debt. If there are months you can pay more, do so.
- Consult with a professional. There are medical advocates available to help you understand your charges, identify mistakes, and negotiate or settle your bill. Some professionals will help negotiate with the medical facility to lower your debt, or settle it completely to avoid you having to fight charges.
However, if you do seek help from a professional, be sure to do your research to ensure you arent falling for a scam. Look out for professionals who charge high fees, make guarantees about your debt, or contact you via mail, email or phone.
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Medical Bills With Health Insurance
Carefully re-read your policy contact your insurance agent if you think charges on a bill should be covered. If you are certain you should be reimbursed, or that your doctor or hospital should be paid by your healthcare provider, file an appeal in a timely manner, as most insurers limit the time you have to question a benefit. It often is just 30 or 60 days.
Be prepared for denials and delays and be careful to keep records of all phone calls and correspondence. That way, if you eventually must file a formal complaint with your states insurance commission or contact a consumer law attorney, you have accurate records.
Be aware that in the end, you may still have to pay the bill.
How Long Before The Collection Agency Reports To The Credit Bureau
Collection agencies must wait 31 days before reporting any debt. If you can pay a delinquent bill before that 31st day, you can likely avoid damage to your credit score and credit report. You have even more time with medical debt. When a collection agency has a medical debt, they have to wait 180 days before reporting it to credit bureaus.
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What Should I Do If I Get A Medical Bill I Cant Afford To Pay
You typically have more time before a delinquent medical bill ends up on your credit report than with other types of debt because medical billing is complex and often involves insurance companies. Since 2017, the credit bureaus have instructed collection agencies to wait at least 180 days roughly six months from the time a bill becomes delinquent before reporting it, Mr. Creighton said.
Dont panic, said Caitlin Donovan, the spokeswoman for the Patient Advocate Foundation. Begin by checking if the bill is accurate. This usually means comparing it with an explanation of benefits from your health insurer or contacting the provider for clarification. The so-called EOB usually states that it is not a bill so people sometimes ignore them. Dont, Ms. Donovan said. The benefit statement is proof that your insurer has been billed and gives you information to help challenge questionable charges. In some cases, Ms. Donovan said, hospitals may mistakenly send bills directly to the patient rather than billing the insurer first.
If the bill is accurate, call the providers billing office and ask about monthly payment plans. Also, many hospitals have programs to help low-income people pay medical bills but they may not mention them unless you inquire. You have to ask, Ms. Donovan said.
How To Get Medical Payments Off Your Credit Report: 4 Things To Know
If medical debt has left you feeling stuck, weve got good news. Thanks to these changes in reporting, you have more options than ever to delete medical collections from your credit report.
Lets take a look at the three changes coming in 2022. Well also look at what medical debts will be removed from your credit report and the types of debt that arent covered by the new reporting guidelines.
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Ask For A Cash Discount
Once youre sure your bill is correct, ask the hospital if there is a cash discount for paying in cash, or if theres a payment plan available, McCall says.
If you dont have enough in your emergency fund to pay your medical bill, a payment plan through your health care provider can be a better option than turning to a credit card or personal loan to cover the cost.
Your health care provider may offer a no-interest or low-interest payment plan to spread out your payments over time without the added cost of high interest rates.
Request Proof And Gather Evidence
If your bill is already paid, you may be able to remove the remark from your report. Collect as much documentation as you can to prove the bill was paid. Ask for payment records from your doctors office, find copies of canceled checks or dig up old credit card statements. This way, you have everything that you need to make your dispute. Paid bills that have gone to collections should not continue to be affecting your credit score negatively.
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Changes To Reporting Paid Debts
Equifax, Experian and TransUnion announced changes to medical debt collection reporting starting this summer when the bureaus say they will change how they handle paid medical collections debt.
Currently, once medical debts are paid, they’re still on your report for a time, but that’s going to change in July. Once you have a medical debt that has been paid off, starting in July, it will come off of your credit report, explained Sara Rathner with NerdWallet.
When Are Medical Bills Sent To Collections
Note that medical bills can be sent to collections even as youre paying them. If youre making too-small payments or late payments or missing payments often, they can be sent off to collections. If you set up a payment plan with your medical care provider, make sure you get it in writing.
Medical bills cant be sent to collections earlier than a predetermined set of time. Most healthcare providers have a waiting period of 60, 90, 120 or even 180 days before theyll send your medical debt to collections. You can ask your lender how long their waiting period is.
Do Medical Bills Appear On Your Credit Reports
During a medical emergency, the last things that youre thinking about are how youre going to pay the medical bill or if there are unpaid medical bills on your.
You may not even know how much your healthcare will cost until you get the medical bill.
Medical bills are so dangerous because, at the time of an emergency, many of the costs are hidden in the complicated web of insurance policies.
Jonathan Walker, Exe. Director, Center for New Middle Class
If you dont pay your medical bills on time, it can negatively affect your credit scores. Medical debt thats paid late or not paid at all can go to collections and affect a credit report.
In this article, well look at what happens when medical bills go to collections, how medical bills affect credit, how to avoid that, and how to remove medical bills on your credit report.
Medical bills are different from regular expenses. When youre in the hospital emergency room, shopping for the best and cheapest service and confirming that your insurance company will cover the costs isnt an option.
When a child breaks her arm, it would be nice to shop around for the best price on a cast like you might for a new water heater, but it just doesnt work that way. Most of the time, you can only deal with medical expenses after the bill is in your mailbox.
What To Do When Your Medical Bills Go To Collections
If you are faced with a medical debt that you are unable to pay off, you should always contact the doctor or medical facility immediately to discuss your options.
Depending on the circumstances, some medical offices may be willing to set up a payment plan for you that can help you avoid collections and help preserve your credit history.
If you are trying to take care of a medical debt that has already been sold to collections, here are some steps you can take:
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How To Pay Off Medical Debt
Treat medical bills like any other debt: Honestly and responsibly. Experts advise to pay the mortgage and credit card bills first, but do not ignore the medical bills.
If the bill becomes onerous or burdensome, do not be afraid to speak up and advocate for yourself. One approach to avoid, or use only as an extreme last resort: Putting medical bills on a credit card. That could lead to a spiral fueled by high credit card interest rates.
Jinnifer Ortquist, who works in Money Management Education for the Michigan State University Extension, emphasizes the importance of verifying bills and date of service.
For complicated services, request an itemized bill from your provider to see how much you were charged for each service, she writes online about dealing with medical debt. Also, make sure that your medical services were submitted to your insurance company.
Ortquist emphasizes keeping extensive documentation, to send a written notice to the provider with a copy of all relevant records and to send the dispute via certified mail with return receipt to ensure you have proof the letter was received.
She advises responding quickly to bills, and to pay what you can and what you owe as promptly as you can.
Using Credit Cards To Pay A Debt
Using a credit card for medical debt is the last resort of last resorts.
Only use credit cards to consolidate medical debt if you can pay the credit card bills promptly. If you cant, first discuss whether the medical provider might offer an interest-free payment plan, which would be more manageable than a credit card debt that accrues interest.
Some patients opt to use medical credit cards, which are like conventional cards but are designed exclusively for medical expenses. Application forms are sometimes available in doctors offices.
Before applying for a medical card, especially one that advertises no interest on balances, carefully review the terms. You probably will discover that the no-interest grace period ends in several months and the interest rate charged after that is quite high.
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