Just as nobody can completely prevent illness, nobody is immune from medical debt. In fact, according to a 2003 study conducted by the Federal Reserve, more than half of collection accounts that are listed on credit reports are associated with unpaid medical bills.
While your medical payment history typically doesn’t appear on your credit report, medical bills can wind up there if they go unpaid and end up in collections. Because the information in your credit report determines your credit score, unpaid medical collections could unfortunately lower your score.
The degree to which a medical collection affects your credit score may depend on multiple factors. In general, the higher your credit score, the more negative an impact a medical collection may have. The amount you owe on the medical collection can also influence how much your credit score is impacted.
In many cases, the longer a medical collection is on your credit report, the less of an impact it will have on your credit score.
What should I do if a debt collector contacts me?
If you have a medical bill in collections, a debt collector may contact you in order to collect payment. By law, debt collectors are required to disclose the name of the creditor and the amount owed, and they must provide you with information on how you can dispute or verify the debt. If you are not given that information during your initial communication, the debt collector must send it to you in writing within five days.
Once you’ve learned that a medical bill is in collections, you may want to create a budget to pay off the debt as quickly as possible. Even though an account in collections will remain charged off, paying it off can still reflect positively on your credit report.
To ensure that future creditors see that you have paid off your medical collection, consider adding a consumer statement to your credit report to explain that you have satisfied the debt. The statement will become part of your credit report and will be included each time your report is accessed.
If creditors see that you have paid off the collection and satisfied your commitment, they could take that payment behavior into consideration when evaluating your application.
Once you’ve paid off your debt, there’s a set timeframe for how long a collection will remain on your credit report. In general, a collection will remain on your credit report for up to seven years and 180 days from the start of the delinquency that led to the collection.
What steps can I take to help avoid a medical collection?
In order to maintain your financial health, consider the following four tips that can help you avoid medical collections:
1. Set up a payment plan. If you receive a medical bill that you can’t pay right away, contact the hospital or billing department. Some hospitals and doctors’ offices have patient advocate services to help patients understand their health insurance policies and bills. If you are unable to pay a bill, you may be able to request a cash discount or create a payment plan with your medical provider.
2. Address any billing errors. Examples of errors you may see on a medical bill include being charged for services you didn’t receive, being overcharged for services you did receive, or not being reimbursed properly for a service by your health plan. If you think you have found a mistake, contact your medical provider’s billing office or your insurance provider, and document the outcome of your dispute in writing.
3. Regularly review your credit report. If you haven’t reviewed your credit report recently, order one of your free annual copies through annualcreditreport.com. Carefully comb through your report to make sure all of your information is accurate and up to date. Check to see if you have any medical collections, and make sure that old medical collections have fallen off of your credit report after the appropriate amount of time has elapsed.
4. File a dispute with the credit reporting agency. If you spot unpaid medical bills on your credit report that don’t belong there, file a dispute with the credit reporting agency reporting the error.
There is some debate over whether medical collections should be included in consumer credit reports. Some believe that medical collections are often the result of disputes with insurers and don’t necessarily reflect payment behavior.
In May, legislation was proposed in Congress that would give consumers more time to address medical bills before debt collectors can report the unpaid bills to credit reporting agencies.
Diane Moogalian is vice president of operations for Equifax Personal Solutions with responsibility for operational strategy and execution in support of customer care and fulfillment of credit and identity-related products for consumers. Prior to joining Equifax in 2007, Diane held several strategic roles with leading financial services companies. Diane graduated from the University of Richmond with a bachelor of science degree in business administration (marketing and economics) and earned a certificate in international business from Virginia Commonwealth University.
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