How Medical Bills Become Collections
During rough times, you naturally don’t put too much thought into what medical debt does to your credit scores. Unpaid medical debt can lead to collections and damage to your credit. Your financial health is also important, so as soon as the situation stabilizes, you should put effort into fixing your score. If you can’t deal with them in time, you need to know how medical bills become collections, what they do to your credit reports, and what your options are going forward.
Paying your medical bills to your healthcare provider on time is the easiest solution, but that is not always possible. Quite the opposite, medical bills are some of the hardest types of debt to pay, especially if your situation changes for the worse. Wondering where to start? Here are some tips on moving forward after medical debt.
When and How Medical Bills Become Collections – The Time-Frame
There is no set time-frame for when your non-paid medical bills become collections, but most clinics and hospitals consider unpaid bills a loss between 90 to 180 days. If you manage to pay or arrange a payment plan for your medical bills before 180 days of them billing you ends, you can be positive that it won’t affect your credit scores negatively.
The unpaid medical bills can be reported to a credit bureau at any point, but they are only considered medical collections after 180 days of the initial report have passed. This is a grace period that the bureaus give you due to the extraordinary circumstances causing you to accrue that medical debt.
The Transfer Process
Your healthcare provider usually won’t try to collect the medical debt personally or report it to the credit bureaus directly. Instead, they sell it to a collection agency or debt buyer. Take note that a collection agency or debt collector must follow certain legal standards set by the Fair Debt Collection Practices Act when trying to collect the debt. If you think you are being harassed, threatened, or treated unfairly by the collectors, you have legal recourse.
Does Medical Debt Impact My Credit?
Yes, unpaid medical debt negatively impacts your score. However, medical collections are treated differently than other types of debt by newer scoring models, namely VantageScore and FICO. They carry less weight than other collections accounts, so they won’t affect your score as much.
On the other hand, most types of debt (i.e. mortgages, credit cards, etc.) can also improve your score if you make on-time payments. On-time payments of medical bills are not tracked, so it can only negatively affect your score.
What Can I Do To Improve My Score?
First off, you should always check whether you are eligible for financial assistance. This can help you pay off your debt so it doesn’t become a medical collection account. During emergency times, such as the COVID pandemic, regulations change and you may be afforded certain privileges you didn’t qualify for previously. Other than that:
1. Verify the Information
Request that your healthcare provider send a detailed breakdown of all the medical costs in writing. Review all the charges to make sure that they are in accordance with the treatment you received. Insurance companies send a document called an Explanation of Benefits which breaks down all the charges – how much they paid for each and how much you owe. If the provider’s breakdown and the EOB don’t align, they are charging you too much.
2. Make Payment Arrangements
Many healthcare providers, or even the collection agency they sold the debt to, will allow you to pay medical bills in monthly installments. Such a payment plan may make it easier on your financial situation, but make sure to get the agreement in writing. This way, if they report it as a negative entry to a credit bureau, you can dispute it with the document.
3. Know Your Right Under the Fair Credit Reporting Act
You can dispute any information you believe to be inaccurate and have it deleted from your credit report. Medical debt can be a negative item on your report for 7 years – after that, it must be removed. If your insurer pays a disputed or overdue bill, it should be deleted from your report (this is not the case if you personally pay the bill).
4. Consult a Credit Analyst
You have the right to dispute any inaccurate, incomplete, or outdated information on any of your credit reports. Your best option is to have a credit expert analyze your report and see what items could be removed from it to increase your credit score.