How Medical Debt Can Impact Your Credit Score
Medical debt is a very common problem in America. As many as one in six credit reports contain some kind of medical debt collection, and medical debt collections comprise as many as half of all debt collections. While it can be very easy to let bills become overdue, medical financial obligations should always be met in as timely a manner as possible, because allowing this debt to go to collections can have a devastating effect on your credit.
Even one collection notice can lower credit score.
The very first time your debt is reported to a collections agency, your credit has been impacted. Having just one bill in collections can lower your score as much as 100 points. The degree to which credit is lowered for an item in collections can be much higher for a person with good credit than a person with bad credit. This means that individuals with otherwise ideal credit scores may see their financial flexibility greatly diminished due to even one unpaid bill.
Although it is possible to mend credit that has been damaged by reported debt, an item that has been reported to collections will stay on your credit report for seven years. The only instances of debt that may not have a major impact on your credit score are those for less than 100 dollars, which, according to new scoring procedures, will not impact credit scoring. Considering that a third of all medical debt in collections is for small amounts like this, these new scoring procedures may actually have a meaningful impact on many patient’s scores.
Medical debt and credit scoring have been the subject of much controversy.
The question of whether it is fair to punish patients by drastically lowering credit scores for unpaid bills has promoted some heated discussions, with individuals on both sides of the argument expressing strong opinions. Many argue that leniency should be shown toward medical debt, since medical bills are often unpaid or severely past due because of confusion about the bill or debate about whether the amount that a patient is being billed is actually accurate.
Many patients may let bills become past due because while they are recovering from a major sickness or injury that do not have caregivers helping them sort out finances. Other patients may believe that they have been billed in error or that more of their bill should be covered by their insurance policy. Legislation such as the Medical Debt Responsibility Act has been introduced that proposes that all medical debt should be taken off credit reports within 45 days after being resolved, but this act has faced much opposition in congress.
Billing mistakes are not a reason to ignore invoices.
If you have received a bill that contains incorrect information, you should not simply avoid paying it. Contact your hospital or doctor’s billing department immediately. If the problem with your bill relates to issues with your insurance carrier, contact both your insurance company and your healthcare provider. If you are disputing a bill, talk to your doctor or hospital’s billing office about what options may be available to you. You may be able to make small payments while you resolve issues with your bill. You may also be able to get an extension on your bill’s due date.
Communicating with the billing office helps both you and your doctor find solutions so that all parties can be satisfied. Doing this will help you avoid having bills go to collections and will ensure that your credit is not damaged by inaccurate bills. Always be proactive when it comes to both your physical and financial health.