Do Medical Bills Affect Credit Scores?

Medical care is essential for each one of us. But we also need to know that we can continue to live stress-free even after our medical ailment has ended. And costly medical bills are anything but stress-free. If you had problems dealing with your medical debt, you’re not alone. Medical bills affect credit ratings – but not in the way you think. They can hurt your credit report even if you pay the bills on time.

But the medical debt you may have doesn’t have to be as detrimental to your credit score as other types of debt can be. You just need to know how to handle it properly. Here’s how not to let medical bills affect credit reports.

How Do Collections Work for Medical Bills?

Remember, just because you’re paying your medical bills, it doesn’t mean they can’t be sent to a collection agency. For instance, if you make small payments, you still may find that collections took over your debt.

Many people are unaware of how and why medical bills show up in collections. The majority of healthcare providers don’t report to credit bureaus. They give you a grace period before listing medical debt into your credit report. So it may take six months to nearly a year for the medical bill to show up in your credit report. That doesn’t mean that the provider didn’t sell your debt to a collections agency in the meantime.

If your medical bills have been sent to such an agency, don’t panic right away. Bear in mind that medical debts are nowadays not as impactful on your credit score as other debt. More recent scoring models, like FICO 9 and VantageScore 4.0, don’t let medical collections impact your score as much as other forms of debt.

But there are older and widespread credit scoring models, too. And such scoring models usually factor in paid collections into your overall credit score, leading to it not being increased after you pay for it.

But what if you never pay your debt? Medical debt will get erased from credit reports after seven years. However, that won’t stop collection agencies from taking legal steps for unpaid bills after that period. Your last resort may be filing for bankruptcy, which will deem the hospital debt fully dischargeable.

As we have said, that’s the last resort. There are many steps to take before medical bills affect credit scores.

What Happens If You Pay Your Medical Debt?

Typically, medical debt is erased from your credit report once you pay for it entirely or once your insurance pays for it to the collection agency.

But there is a catch. And if you’re not aware of it, your supposedly solved medical debt can still affect your credit score negatively. It would be best if you made sure that the debt is marked as paid on your reports. True, the collection will stay on your credit report for seven years (in addition to the grace period from the delinquency date), but your credit score will finally improve.

If you check your credit score a few months after paying the debt and see that it hasn’t been marked as paid, you can file a dispute with all three major credit bureaus – TransUnion, Equifax, and Experian. The dispute should focus on rectifying the error in your credit report.

Do Medical Bills Affect Credit Scores

Steps to Take Once a Medical Bill Arrives

When a medical bill arrives, the best advice we can give is – act quickly. Here are some helpful steps to take once you get a medical bill:

● Review the medical bill to ensure it is accurate.
● In case of an error, contact your insurance and health care providers to take care of the issue.
● Pursue the matter diligently until the error is resolved.
● If there is no error, work on preventing the medical bill from going to collections by paying on time.
● But you may need to set up a written payment agreement with the healthcare provider. That is because you need proof that your debt can’t be sent to collections as long as you are making payments as agreed with your provider.
● Remain in touch with your healthcare and insurance providers to keep them in check. Lots of providers have developed processes for creating payment schedules for their clients’ bills. Make sure they are keeping you updated.

Keep Your Credit Score Healthy

Another vital step to take is to consult a credit analyst about your medical bills. Suppose you suspect that there is incomplete or outdated information on your credit reports. In that case, credit experts at White, Jacobs and Associates can go over your financial history and start laying out your personalized plan for fixing your credit score.

Click to rate this post!
[Total: 0 Average: 0]