Medical costs can sneak up on you. They’re often confusing and even frustrating.
Billing statements may be hard to read. So can an insurer’s explanation of benefits (EOB). Sometimes there’s a coding error or the charges are mistakenly denied. Or maybe there just isn’t enough money in the bank to pay the bill all at once.
Meanwhile, time may pass while you’re making phone calls, asking questions and waiting on some kind of resolution — and the bill might go unpaid during that time. Maybe forgotten. Maybe ignored. Maybe impact your credit.
Most doctors and hospitals don’t report unpaid bills directly to the agencies that determine a person’s credit status. But if a bill becomes delinquent while you dispute an insurance claim or try to negotiate a payment, it eventually could land in the hands of a debt collection agency.
And if that bill collector reports it to one or more of the major credit bureaus, it might result in a ding to your credit standing and/or a decrease in your credit score.
Before we get started, a brief note: As with any credit-related tips in articles like this one, your mileage may vary.
The views in this article are very general in nature and based on assumptions, and it’s likely your situation will differ and have all sorts of variables we can’t account for. Never rely on a blog post like this one for financial, legal, or tax decisions.
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Can delinquent medical bills affect your credit?
Nearly three in 10 insured Americans have had an unpaid medical debt sent to a collection agency, according to a 2019 Consumer Reports survey.
Of the 1,000 adults surveyed, 24% said they didn’t realize the bill was owed, and 13% said they never received the bill. Another 10% said the bill was sent to collections mistakenly, even though they had already paid.
What constitutes a delinquent account may vary between medical and medical insurance providers.
Also, according to the same Consumer Reports survey, nearly one-fifth of Americans say their credit scores have been negatively affected by unpaid health care bills.
A low credit score may make it more expensive to borrow money (at a higher interest rate) or more likely that a loan application could be denied.
Determining how an unpaid medical bill will affect your credit standing could get complicated. The credit models lenders use to gauge their amount of risk in working with borrowers typically include things like payment history, amounts owed, length of credit history, credit mix and new credit.
But the current models may give different weights to various categories when making their assessments. It’s also good to note that different lenders may employ varied credit scoring models.
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Recent changes for consumers
There’s good news for those struggling with medical debt, however. With FICO Score 9, the newest version of FICO credit scores, as well as VantageScore 3.0 and 4.0, medical debt now has less impact on a person’s score because it carries less weight in the calculation.
Another recent change is that the three credit reporting agencies now have to wait 180 days before including an unpaid medical bill on a credit report.
That grace period is meant to give consumers, health-care providers and insurance companies an opportunity to sort out their differences before the bill damages a person’s credit.
Once that six-month period is over, however, if the bill is over $100, it can go on a person’s credit report. That said, the credit agencies remove medical debt from a person’s credit history once it’s fully paid off.
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Protecting credit from medical debt
Even with these new changes, it’s still important to take an active role in making sure medical bills don’t crush your credit. It may be worth considering these steps:
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Knowing what you owe
Just because you left a doctor’s office without forking over more than a copay, doesn’t mean you’re done. The bill’s submission to your insurance company doesn’t automatically mean it will be accurate or even paid.
Reading the bill and the insurance company’s explanation of benefits to be sure there aren’t any errors — and to see if you’re still responsible for paying some part of the remaining balance — could prove helpful. Following up with monthly or even weekly calls to make sure the bill is paid may also be key.
If the time has passed without resolution and your health-care provider is threatening to turn the bill over to a collection agency, one general recommendation is seeing if you can negotiate a payment schedule instead — while continuing to pursue reimbursement from your insurance company if you feel you should be covered.
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Getting ahead of that collections call
If you know ahead of time that you won’t be able to pay the entire amount owed, it’s recommended to contact the healthcare provider’s billing office or financial department and try to negotiate a lower amount or a payment plan. If you can come to an agreement, it’s a good idea to get it in writing.
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Staying on the collection agency’s good side
If a collection agency employee contacts you about a bill you think has been paid or should have been paid by insurance, stay calm and ask if you can call back with information that shows there’s no open balance.
If you do, in fact, owe some money, one option is to ask if you can send the money right away to avoid any damage to your credit. Again, it’s recommended that you get everything in writing.
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Getting mistakes removed from your credit report
If your bill went to collections by mistake, you can take steps to have it removed. Collect as much evidence as you can to prove your case: Dig up copies of old credit card or checking statements or ask for payment records from your medical provider’s billing office.
If your insurance company shows you as already having paid the bill, provide whatever paperwork you have. Another common step is to file a dispute with the credit bureau that’s reporting the error.
The credit bureau will need to investigate and respond to you within a prescribed period of time — 30 days. You may also receive email updates from the credit bureau regarding the status of your dispute.
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Making good on that bill
If the balance on your medical bill is yours to pay, you can look for ways to make that process manageable. If there’s room in your budget to pay it off immediately without borrowing money — even if you have to make some adjustments — then that may be your best bet. Or maybe you can take on a temporary side hustle to cover the cost.
If that’s not possible, you may wish to explore other avenues, such as a zero-interest or low-interest credit card, as long as you can be disciplined about making on-time payments and are able to pay off the balance before the introductory rate goes up.
Or you may consider an installment loan such as an unsecured personal loan to pay off the balance of your medical bill before it goes to collections. A personal loan might have a lower interest rate than your credit cards (depending on your credit record and other factors) and may offer additional options for repayment.
A personal loan may be beneficial when negotiating with your medical provider, who may prefer to be paid in a lump sum rather than over months or years.
Key to maintaining a solid credit record is to pay bills on time — long before they reach collections. Staying on top of medical bills can mean extra vigilance — but the effort has the potential to make a real difference to your financial future.
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