How Medical Debt Affects Your Credit
Adding insult to injury (or serious illness in some cases) is the fact medical bills can impact your credit — sometimes without you even being aware.
While it’s true bills from a doctor or hospital visit aren’t included in your credit history and won’t affect your score, it’s a different story if those bills go to a collection agency.
As anyone who has had a medical emergency or a hospital stay knows, the medical billing system can be complex, to put it kindly.
Often a bill will show up months after your stay and may even be a mistake in the system. If you dispute the bill, it can take months longer to clear up.
Meanwhile, the hospital or physician may simply tire of waiting to get paid and turn it over to collection.
Typically the collection agency will immediately report the debt to the credit rating agencies as an unpaid obligation.
To the credit agencies, one unpaid bill that has gone to collection looks just like any other. If you aren’t careful, your medical bills can ruin your once-stellar credit very quickly.
To avoid this damage happening to your credit, here are some things you need to know:
1. A medical bill can be turned over to collection.
Sometimes this happens without the billing office notifying you. Unfortunately, this is a common occurrence in today’s complex medical billing environment.
When a hospital or physician’s office sends a bill to a patient and that bill goes unpaid, they may not send a follow-up notice. If the bill remains on their books for more than 90 days, it may be automatically or routinely sent to collection.
2. The amount of money makes little difference.
The amount of money due has no particular impact on whether a medical provider will send the bill to collection.
There are reports of bills as little as $15 being sent to collection for the unpaid insurance co-pay. Any bill from a doctor or hospital should be taken seriously, regardless of the amount owed.
“Even if you are making payments, it can
still be turned over for the unpaid amount.”
3. What if you’re doing all the right things?
Even if you have made an arrangement and are making payments toward a medical debt owed, it can still be turned over to collection for the unpaid amount.
This can happen if the doctor is making administrative changes to his practice, is discontinuing a certain portion of his practice or has decided to outsource his billing.
Consider taking a loan to pay off any medical bills to an individual doctor’s office.
4. What if you have insurance?
Just because you have insurance doesn’t mean your unpaid medical bills won’t be turned over to collection.
There are many instances of insurance claims that get rejected or lost and the medical provider will bill the patient instead.
In addition, there is the practice of balance billing, where a medical provider may attempt to charge for the difference of what the insurance pays and the total amount owed.
In these cases, disputing the bill may still mean it ends up in the hands of a collection agency.
5. Billing errors, insurance problems, misdirected bills or honest mistakes.
Any of these can cause a medical debt to go unpaid. Keep in mind the potential impact to your credit score whenever medical bills are involved.
Check and re-check with insurers, the medical providers and the billing companies any outstanding debts that may be owed.
If you want to avoid watching your score go from pristine to not so good very quickly, then stay aware of your outstanding medical debts.
Check your credit report at least annually and contact the reporting agencies if you see anything unusual.
While it’s still true unpaid medical bills don’t show up on your credit report, once they go to collection, they’re just as damaging as any other uncollected debt.
Photo source: Mint