Do Doctor Bills Affect Your Credit Score?
It is therefore clear that unpaid medical expenses can affect your credit score especially when they are sold to a collection agency. However, before your doctor bills get to that level, you have options that can ensure they never even make it to your credit report. Now, it is important to consider how unpaid doctor/medical bills can impact credit in more detail.
The Medical Billing Process
First, let us consider the general process of medical billing. After you see your doctor and receive your treatment, the healthcare provider who treated you will send a bill to your insurance company. Depending on your plan, the insurer will pay the amount they are obligated to and you will be required to make the remaining contribution.
Subsequently, you will receive a bill from the doctor’s office detailing other charges that may include copayment, deductible, coinsurance, or for services not covered by the insurance. If you can afford it, it is recommended that you pay this bill as soon as possible or negotiate an installment plan with the provider.
Consequences of not Paying
If you do not pay your medical bills, the remaining balance is sent to a collection agency at some point. The doctor’s office does not directly write off debts to the credit bureau. However, once in collections, the chance to report to the major credit bureaus becomes possible.
The Consumer Financial Protection Bureau shows that 47% of all past-due medical debt on credit reports is from unpaid bills in collections.
How Medical Bills Affect One’s Credit Rating?
Here are some ways through which medical collections can harm your credit:
- Payment History: An unpaid medical bill that is sent to the collection falls under the credit accounts that payment history which constitutes 35% of FICO score. This effect can be mitigated by having more positive payment history accounts.
- Credit Utilization: FICO scores also consider the proportion of credit balances to credit limits by giving it 30 percent weight. Medical collections reduce credit scores since they are included in the amount of owed debts. Building up other debts could help to offset new collections.
- New Credit Applications: Collection accounts also fall under new credit, which is 10% of the FICO credit score. An opening of too many new accounts within a relatively short time is associated with a higher risk to the lenders.
- Amounts Owed: When, therefore, consumers have larger unpaid medical debts, this signifies that they are exposed to greater credit risk since the amount owed also stands out as a factor that accounts for 15% of a FICO score.
Top Recommendations On How To Avoid Credit Harm
Ideally, the best time to look into unpaid medical bills is before they are even sent to collection. Here are smart strategies for protecting your credit from doctor/medical bills.
Contact the Billing Office
Call your healthcare provider’s billing department and ask about the possibility of setting up a payment plan or request information about their financial program. Communicating to the creditors that one intends to pay in full is being proactive and thus is a good faith effort.
Explore Payment Assistance Programs
There are other non-profit organizations such as the Patient Advocate Foundation and Patient Access Network Foundation offer assistance with expensive medical bills for families with specific income levels. Moreover, some doctors or hospitals have reimbursement or sliding-scale options for patients with no insurance.
Negotiate with Collections
In case your medical bills go up the collectors’ list, don’t waste time and try to negotiate a payment plan. Even if one has paid off the collections account, it is important to ensure that the agency does not report it to the credit bureaus. Ensure that you communicate the settlement in writing and only when the other party signs and agrees to accept payment in full.
Dispute Inaccurate Medical Debt
If there is a medical collection account that suddenly appears in your credit reports and it is misleading or incorrect, contest the error immediately to the involved credit bureaus. Ensure that you back your claim with documents and records to substantiate the disagreement. Under the Fair Credit Reporting Act, creditors are mandated to investigate and verify the information relating to the credit of a consumer once the consumer makes a dispute.
How to know if you have medical collections?
Apart from this, it allows one to keep abreast with new collections accounts that are reported thus affecting your credit status with lenders. AnnualCreditReport. Com gives free weekly credit reports during the pandemic and they include Equifax, Experian, and TransUnion. Free services such as Credit Karma can also notify you of such changes.
One unpaid doctor bill is enough to destroy a good credit rating. However, adhering to these best practice tips and recommendations should go a long way to assist patients avoid catastrophic blows to a credit score from inevitable medical expenses. Credit health requires constant communication, and the ability to act promptly to prevent any issues from arising.
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