Do Hospital Bills Affect Your Credit Score?

Are Hospital Bills Credit Report Friendly?

Unpaid medical bills can affect the credit score. Medical debts are categorized just like any other debts that Credit Reporting Agencies flag in case they go unpaid. By not meeting your hospital bills, the accounts may be transferred to collections which is damaging to your credit. Now let us dig a little deeper into the aspect of hospital/medical bills on your credit.

The Medical Debt Impact

Many United States citizens have medical bills they cannot afford. Studies show that around 19 percent of Americans have credit records including past-due medical expenses. For a routine visit with a doctor, these expenses may be as little as a few hundred dollars; for major operations or extended hospital stays, they could run tens or hundreds of thousands of dollars.

Any unpaid medical bills turned over to collection companies, however, are certainly reported to the three main credit reporting bureaus—Experian, Equifax, and Trans Union. Many hospitals and medical professionals do not usually hand past-due debts to departments for collection. Usually, you have several months to work out alternative refund policies or payment terms. Once an account goes to collections, however, it may seriously lower your credit ratings.

How Medical Debt Affects Credit Scores?

As with most other debts, medical bills that are unpaid and in collections will negatively impact your credit in several ways.

1. Credit Payment Record – This is one of the critical factors that determine the credit score; it has up to 35% of the score, based on credit card payments, auto loans, mortgages, and student and medical credit. If you are unable to repay your medical expenses, they will be reflected here.
2. Amounts Owed – This factor contributes about 30 percent to your credit score based on the amount owed on all types of debt. Having any medical collections can have a detrimental impact on this part of your score.
3. Medical collections - aren’t considered to be part of your credit mix, but any additional type of debt can negatively affect this aspect of your credit score.
4. New Credit – This is normally the final stage as it appears when medical debt goes to collection, and it impacts one’s chances of being approved for new credit or loans.

The Effects of Medical Collections on Credit: How Long Will Medical Collections Affect My Credit Score?

Medical bills, in particular, the unpaid ones, are usually less detrimental to credit scores as compared to other forms of debt, credit cards, personal loans, and the like. Under newer credit score modeling, paid and unpaid medical debt comes off your credit reports much faster.

• Collection accounts for paid medical bills will be deleted from your reports after one year instead of seven years, as is usually the case.
• Other debts such as unpaid medical collection will be removed from reports after 36 months instead of 7 years usually.
• Debt that is below $500 in medical bills will not be reported to the credit bureaus.

Despite these changes, medical collections can be very detrimental to your credit score especially if the collections have been made within the first 1-2 years. Even though the particular credit has been turned over to a collection agency, timely paying off the outstanding balance will enable one to improve their credit score in the shortest time possible.

Preventing Medical Bills From Ruining Your Credit

If you have outstanding medical bills here are some tips to manage the debt in a way that minimizes damage to your credit.

• Medical Bills – Re-read all the hospital and provider bills and scrutinize the charges to avoid any mistakes. This can help to decrease the levels of liabilities.
• Pay What You Can – It is even helpful, if not possible, to pay as much of the outstanding healthcare bills as possible even if one cannot fully pay for them. Even any payment activity can help.
• Free or Reduced Cost Services – Often there are free or reduced-cost services available at a hospital or from a provider if you just ask. Apply for any of these programs if you meet the requirements to be enrolled.
• Visit them – go to the billing offices and sit down with the service provider then explain your predicament and kindly ask them if they will agree to offer you an option of an interest-free payment plan or if they will allow you to pay them a certain amount of money in full and final settlement.
• On Payment Plans - Medical, payment plans let you pay an amount of the medical debt each month while not placing accounts into collections. They help protect credit.
• Do not multiple account closures - It is advisable to avoid closing off a hospital billing payment plan until it appears completely paid and settled on your credit report. Records of written payment confirmation should also be retained. This ensures that when credit bureaus report accounts, they do it as paid and not abandoned.

The Bottom Line

At the end of the day, attempt to pay medical bills in the shortest time possible and at the lowest cost possible. This will assist in maintaining a good standing of the accounts, avoiding any collections status and thus reducing any credit hitches. For more information on dealing with high medical expenses, get advice from accredited nonprofit organizations that provide credit counseling for free. This is why it is extremely important to be cautious of medical debt relief companies that demand upfront fees – they worsen the situation. Thus, it is possible to manage even a great amount of medical debts wisely and patiently without harming your financial and credit situation.

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