Suze’s Financial Strength Test
Answer Yes or No to the follow statements.
I pay all my credit card bills in full each month.
I have an eight-month emergency savings fund separate from my checking or other bank accounts.
The car I am driving was paid for with cash, or a loan that was no more than three years, and I sure didnât lease!
I am contributing at least 10% of my gross salary to a retirement plan at work, or I am saving at least that much in an IRA and/or regular taxable account.
I have a long-term asset allocation plan for my retirement investments, and once a year I check to see if I need to do any rebalancing to stay on target with my allocation goals.
I have term life insurance to provide protection to those who are dependent on my income.
I have a will, a trust, an advance directive , and have appointed someone to be my health care proxy.
I have checked all the beneficiaries of every investment account and insurance policy within the past year.
So how did you do?
If you answered yes to every item, congratulations. If you are working on improving on a few items, I say congratulations as well.
As long as you are comitted to truly creating financial security, I applaud you. If that means you are paying down your credit card balances, or are building up your emergency fun with automated payments, thatâs more than fine. You are on your way!
Can Medical Bills Be Sent To Collections Hipaa
HIPAA and Collection Agencies HIPAA regulations affect collection agencies if they are dealing with medical debt. … In order to collect a medical debt, collection agencies do not need detailed information about your health and medical history unless it is directly involved with the debt they are trying to collect.
Why Medical Debt Is So Tricky For Consumers To Manage
McCall explains that its often difficult for consumers to know what expenses theyre on the hook for and what will eventually be paid by insurance, if they have coverage.
An account that went to collections but has since been paid stays on your credit reports for about seven years after it gets sent to collections. Were punishing consumers for something that happened unexpectedly seven and a half years ago, that theyve paid off, McCall says. Theyre still being punished for it.
Read more: How To Remove Collections From Your Credit Report
Errors in medical billing make matters worse, McCall explains. Medical bills frequently include coding errors, which could result in the patients financial responsibility being far larger than expected.
McCall of this: When she was in the hospital giving birth, she was given an aspirin. But the bill she received later indicated that instead of being charged for one aspirin she was charged for the entire bottle .
The credit reporting system forces patients and their families to pay bills whose accuracy they doubt, said Consumer Financial Protection Bureau Director Rohit Chopra in a statement on March 1. The announcement from the three credit bureaus came shortly after the CFPB announced it would scrutinize credit bureau practices regarding medical debt and investigate potential improvements to the medical billing and collections system.
Recommended Reading: What Credit Report Does Discover Pull From
Medical Debts Now Weighed Differently
These older scoring models are designed to pay attention not so much to the type of collection or even the balance of a collection, but rather to the fact that a collection occurred in the first place. Michelle Black
Even a small medical collection account could potentially be just as damaging to your credit scores as any other type of collection account, she says.
But things are changing. The newest version of the FICO credit score, the FICO 9, and the VantageScore 3.0 weigh medical bills in collections less than other unpaid accounts. They also add a 180 day waiting period for medical bills. If the bill goes to collections, you have a 180 day grace period to resolve the issue before it shows up on your credit reports.
The bad news is that most lenders dont yet use the newer scoring model, Black says.
If you pay a medical bill with a credit card, you lose the new medical bill protection in FICOs latest credit scoring system if the credit card bill is paid late, says Kevin Gallegos, vice president of Phoenix operations for Freedom Financial Network.
Once debt is owed to a credit card provider, it is not possible to distinguish whether it was from a hospital, vacation, or a shopping spree, Gallegos says.
Personal loans are an alternative to credit cards for paying off medical debts. They dont come with 0% APR deals but tend to have lower interest rates, which makes them helpful if you want to pay the bill over time.
How Medical Debt Affects People
The Consumer Financial Protection Bureau says that 43 million Americans have about $88 billion worth of medical debts on their credit reports. The agency adds that medical debt accounts for 58 percent of bills in collections.
Many people with otherwise sparkling credit records are dragged down by medical debt. Having a debt in collections could easily trim 100 points off a strong credit score. That may not have been fair, explains CFPB director Rohit Chopra.
In many ways, its hard to call medical debt a real debt, he said. Few people choose to take on medical debt, and typically, patients have no idea how much they will be charged for a service or a procedure. Theres no upfront disclosure or interest rate to compare. Individuals and families must confront a billing and collections system that can be best described as error-plagued, confusing and labyrinthine.
Recommended Reading: Does Failing A Credit Check Affect Your Credit Rating
How Long Will The Collection Stay On Your Credit Report
In general, accounts in collection will remainon your credit reports for seven years, plus 180 days from whenever the accountfirst became past due. Once the original creditor sells your delinquent debt toa collection agency, the collection account can be reported as a separateaccount on your credit reports.
What Happens After The 7 Years End
Once outstanding medical debt drops off your credit report, it wont be counted against you when applying for loans, housing, or credit cards. That should be a weight off your shoulders. However
Youre still legally responsible for the debt
You do technically owe the debt until its paid, even if no one is pursuing you for collection.
Collectors can still try to collect the debt
This doesnt mean they will, but collection agencies can keep pursuing the debt after the seven-year mark.
Can your medical debt be forgiven?
Debt forgiveness or debt settlement may be options for you. These are different processes from removing a debt just because a debt drops from your credit report doesnt mean its forgiven or settled.
Also Check: What Is The Best Credit Score You Can Have
Collection Agencies Dont Always Play By The Rules
Collection agencies can sometimes be pushy, and some may even violate the Fair Debt Collection Practices Act, which prohibits debt collectors from using abusive or deceptive practices in an attempt to collect from you.
If you suspect youre being harassed or treated unfairly, its important to know your legal rights. We recommend consulting with a legal professional as a matter of course, but you can start by checking out our guide to your debt collection rights.
What Is The Medical Debt Exception
The Medical Debt Exception is a law that states that medical debt will not be reported to the credit bureaus if it is paid off within 45 days of the original bill. This means that if you have medical debt, you can pay it off without it affecting your credit score.
The Medical Debt Exception is a federal law that was passed in 2003. The law was designed to help people who had been struggling to pay off their medical debt. The law states that if you are able to pay off your medical debt within 45 days of the original bill, the debt will not be reported to the credit bureaus.
The Medical Debt Exception is a valuable tool for people who have medical debt. If you are able to pay off your debt within 45 days, you can do so without worrying about it affecting your credit score.
Read Also: Does Snap Finance Report To The Credit Bureau
What Is The 7
The 7-year rule is the industry standard for how long medical bills can stay on your credit report. This rule is not set in stone, however, and there are ways to get medical bills removed from your report before 7 years.
Medical collections will stay on your credit report for 7 years from the date of first delinquency. This means that if you miss a payment and it goes into collections, the collection account will stay on your report for 7 years. After that, it will fall off your report and will no longer impact your credit score.
There are a few ways to get medical collections off your credit report before 7 years:
-Pay the collection in full: This will remove the collection from your report immediately.-Negotiate a pay-for-delete agreement: You can try to negotiate with the collection agency to have the debt removed from your credit report in exchange for payment. This is not always possible, but it is worth trying.-Dispute the debt: If you have reason to believe that the debt is not yours or that the amount is incorrect, you can file a dispute with the credit bureau. If the dispute is successful, the debt will be removed from your report.
Next Steps: How Can I Keep Medical Collections From Ever Appearing On My Credit Report
These tips could help you keep medical bills off your consumer credit reports.
Recommended Reading: How To Get Something Removed From Credit Report
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:
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People with low incomes
When You Receive A Medical Bill In Error
You can occasionally wind up with a medical bill that you aren’t responsible for because of:
- A medical coding error: If the services arent coded properly, your insurance company might not pay for them, even if they were supposed to be covered.
- Duplicate quantities: If a service is accidentally entered onto your bill twice, your insurance may only cover the first instance, leaving you liable to pay for a second procedure or appointment that you never received.
- Incorrect personal information: If your account number or contact information is listed incorrectly, you may receive someone else’s bills by accident.
- Incorrect insurance information: If your medical provider doesn’t have the correct insurance information for you, they may send bills to the wrong company, which will refuse coverage.
If you receive a bill thats not correct, or you believe that your insurance company should have covered it, you can take immediate steps to have the bill corrected.
Contact the hospital or provider as soon as you can after receiving the bill. If you can point out errors or correct out-of-date information, they may be able to resolve the issue within a few days and cancel the incorrect bill.
Recommended Reading: Is 776 A Good Credit Score
How To Eliminate Medical Debt And Improve Your Credit Score
Smedsrud warns that while this announcement is good news, it “does not eliminate medical debt, and doesn’t eliminate all medical debt on credit reports.” And he’s right.
Regardless if you owe $250 or $50,000 in medical debt, this announcement doesn’t alleviate your responsibility to pay the debt. However, there are several things you can do to start paying down your medical debt today:
- Smedsrud mentioned that, “providers are more than willing to settle on these things.” They’re willing to get paid something, rather than nothing. So give them a call, review the charges together, and try to negotiate a deal with them. It could be a lower lump-sum payment, or even a payment plan with no interest. He added that, “you’d be surprised, they will take 25 or 50 cents on the dollar.”
- Work with independent advocates and government agencies: Smedsrud urged consumers to be their own advocate when it comes to medical bills and debt. Organizations like RIP Medical Debt, HealthWell Foundation and the Patient Advocate Foundation work with individuals to help pay off medical debts. And if you qualify for Medicaid, you can potentially be eligible to have retroactive medical bills covered as well. So if you’re in a bind, it may be worth reaching out to see what services they could offer you.
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6.99% to 24.99% APR when you sign up for autopay
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Loan purpose
Debt consolidation, home improvement, wedding, moving and relocation or vacation
What To Do About Medical Bills
February 10, 2022by Consumer Center
No one is immune to medical bills, and even those with insurance can find themselves drowning in medical debt. Just one bad debt can cost you hundreds of dollars down the line and can haunt you for several years.
However, medical bills dont have to be a constant worry in your life, and if you are worried about the bills affecting your credit, there are ways to deal with them.
Recommended Reading: How To Get Items Removed From Credit Report
Whats Changing With Medical Debt And Credit Reports
Starting in the summer of 2022, some U.S. consumers will have medical debt dropped from their credit reports. Thats because most medical debt is the result of an emergency or one-time medical problem and doesnt accurately reflect a persons credit worthiness.
Beginning July 1, 2022, the credit reporting bureaus will wait 1 year before including medical debt in a credit report. Previously, the credit reporting agencies waited 6 months. The extra time gives people more time to pay medical bills or negotiate payments with healthcare providers or insurance companies.
Also starting July 1, 2022, paid-off medical debt wont appear in consumer credit reports. Previously, medical debt even if it had been paid remained on a credit report for up to 7 years.
Equifax, Experian, and TransUnion also will stop adding medical debts of less than $500 to consumer credit reports starting January 1, 2023. Unpaid medical debt of $500 or more may still appear on credit reports.
The Credit Reporting Time Limit
Companies use your credit report information to gauge whether youre a responsible borrower. Naturally, some information is more important than others. In particular, actions from your recent history are more indicative of your credit habits than things from decades ago.
While positive information can stay on your credit report forever, provided those accounts are still open. Closed accounts may eventually drop off your credit report according to the credit reporting agencies guidelines for keeping this information.
Fortunately, credit mistakes wont follow you forever. Most negative information can only stay on your credit report for a maximum of seven years. Certain types of negative information will stay on your credit report for longer.
| Type of Information | |
| Hard inquiries | 2 years |
Tax liens and civil judgments are no longer included in your credit report based on changes the credit bureaus made to reporting practices.
Recommended Reading: How Long Do Closed Accounts Stay On Your Credit Report
How To Prevent Medical Bills From Appearing On Your Credit Reports
Being proactive is one of the best ways to prevent medical bills from appearing on your credit reports. By reviewing each medical bill and working out a payment plan with the health care provider, you may avoid the collections process altogether. Consider taking the following steps recommended by the CFPB.
1. Review Every Medical Bill
If you donât understand some of the charges or you believe thereâs an error, contact the provider. Ask them to explain each part of the statement or ask for an itemized bill to check how much you were charged for each service.
2. Check Whether Health Insurance Will Pay
Ask the health care provider whether theyâve requested payment from your health insurance company. They may have mistakenly sent you a bill before running it through insurance.
3. Pay the Bill
Once you understand the charges and youâve confirmed youâre responsible for the balance, itâs best to pay the bill by the due date. Keep documentation of your payment, and make sure itâs processed.
4. Create a Payment Plan With the Provider
If you canât pay the entire medical bill at once, your medical provider might be willing to set up a payment plan or lower the amount due if you contact them before itâs turned over to a collection agency. Before agreeing to a payment plan, make sure itâs realistic for your budget. Get details of the agreement in writing, then pay the installments on time.