How to Keep Medical Bills from Crushing Your Credit Score

File folder with past due medial billsThe discussion of healthcare in the United States has been a hot topic for several years, due in part to the rising cost of receiving quality medical attention. In 2015 alone, health care costs accounted for $3.2 trillion or just under 18% of the country’s GDP, and on average, that breaks down to nearly $10,000 per person. Paying for healthcare can be a challenge for millions of American each year given that most health insurance policies do not cover all the expenses. When medical bills start rolling in after a medical emergency, pregnancy, or an ongoing chronic medical condition, medical debt becomes a reality.

Here’s how medical debt affects your credit history and score.

When Medical Bills Matter

Receiving a medical bill does not automatically mean your credit report and score are about to suffer. Only unpaid medical debts or those that find their way to collections status harm your credit profile. Once a medical bill is received, it is important to get in touch with the provider, whether that is the doctor’s office, hospital, or emergency clinic, as soon as possible so that they can explain exactly what you owe out of pocket. In some cases, preemptive medical bills arrive at your door, before the health insurance company has had an opportunity to pay its part. Get a clear break down of what your financial responsibility is before submitting any payment.

Try to the Bill by its Due Date

Once you have an idea of what you owe, the best thing you can do to avoid negative marks on your credit report is to pay the balance by the due date indicated on the bill. If money is tight and you cannot make a full payment, work with your provider to create a payment plan that fits into your monthly budget. Nearly all healthcare providers offer payment plans to those who reach out proactively, but you may also consider financing the debt through a credit card or personal loan. Ignoring the bill eventually leads to a late payment mark on your credit report and ultimately, a lowered credit score.

The Affect on Your Credit Report

When a medical bill remains unpaid, the provider is often quick to turn over the debt to a collections agency. In some extreme cases, the creditor may sue you in an effort to recover any past due payments. Both consequences of avoiding medical debt can put a serious dent in your credit in a short period of time. However, the total effect of having a medical debt result in a collections account or a judgment on your credit profile varies from individual to individual. Other credit factors, like the responsible use of credit cards, on-time payments for personal, student, or mortgage loans, and the length of time credit has been in good standing are considered in conjunction with medical debt. If you’ve had a strong credit history prior to a past due medical bill, your credit score may not suffer more than a few points. On the other hand, if managing credit has been an issue in the past, the addition of a defaulted medical bill will drag your credit score down in a more noticeable way. As with any other negative mark due to non-payment or serious default, medical debt can stay on your credit report for up to seven years.

Work with Your Provider

When savings or cash flow are not enough to pay for medical bills, it is beneficial to devise a plan to initiate payment directly with the provider as soon as possible. Medical debt is not a guaranteed negative on your credit report when you are proactive in communicating with your creditor, and you take the steps necessary to pay what is owed.

Posted on September 1, 2017 by in Debt Management

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