Do Medical Bills Affect Your Credit Score Negatively?

Medical Debt

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For many years people would say that medical bills were ignored by certain creditors when they were added to your credit report even though they affected your credit and your credit score negatively. The thinking was that people do not have control over when they get sick. Medical debt is something that is out of your control. So it did not carry as much weight with creditors who looked beyond your score.

Medical bills have always had an effect on your credit score. Often if you were purchasing a home you will be required to pay them off before the lender will approve you. Medical bills not only affect your credit score but they can stop you from obtaining the credit you deserve. You will need to know how to deal with medical collection agencies. Most doctors and hospitals will turn your debt over to a collection agency that specialized in collecting medical debt.

Why Do Doctors and Hospitals Turn Your Bill Over To A Collection Agency?

Doctors and hospitals almost never collect on their patient’s collections accounts themselves. If they do attempt to collect the debt internally you will most likely not see your credit score drop because the debt is rarely reported.

It is after they have turned your debt over to a collection agency that your credit score will drop. I have seen these debts turned over in as little as 90 days and as long as six months after the medical debt was incurred.

It is always better to try and work out payment arrangements on your debt before the doctor turns the debt over to an agency. Many doctors will accept low payments over time so they are not losing more money by hiring a professional collection agency.

Medical Debt

This is good for you if the doctor is willing to take payments. Usually the minute you stop making payments and communicating with the medical professional, they will turn the debt over to a collection agency.

How Badly Will Medical Debt Affect My Credit Score?

Medical debt can affect your score up to 100 points. Once the medical debt is reported it will remain on your credit for 7 years like any other unpaid debt. However, in 2017, the credit reporting bureaus created a policy, that once your medical debt is paid, it will no longer remain in your credit history. This is good news! It will remove the charge off from the report completely once the collection company reports the debt paid in full!

Credit Score Drops

Many people have medical issues and no way to pay the debts that are incurred. Since a health issue is not something that you spent money on unnecessarily, it seems fair that they will remove a medical collection once it is paid. The goal is to collect the debt, not ruin your life for 7 years even though you already paid it.

It also gives people the motivation to pay these debts back. I suspect with higher deductibles and medical expenses for people without insurance, that this was a proactive way to motivate borrowers to pay back their medical debt.

Can I Settle My Medical Debts?

Yes! The good news is once it gets to a collection agency you may be able to settle your debt for less than what you owe. Often, medical debts are sold for pennies on the dollar so you may be able to negotiate the bill for less than you owe. There are some things you need to keep in mind when dealing with a collection agency. If the debt is newer they are less likely to settle. Let me explain further. There are statistics that directly correlate the age of the debt with its value.

In other words, if a debt is a couple of months old, statistically, the debtor wants to pay it off they are motivated to maintain or repair their credit. As the debt ages, people adjust and become less attached to the damage the debt is doing and are less likely to pay the debt. A debt from 3 years ago has far less value than a newer debt that is less than 12 months old.

As the debt ages, the negotiations are in your favor. After all, in a couple more years, the debt will be off of your credit report so many people will just wait it out.

How Do I Get A Medical Collection Removed From My Credit Report?

Since you have had the medical debt sent to a collection agency, you can always try to dispute the debt based on the technicalities.

Gather Information

Anytime you are battling a collection company, you need to be prepared with information.

  1. First, you will want to collect any information concerning the debt from the paperwork you already have or from the original creditor. I have actually called the original creditor to get the information I needed. That would be the doctor or hospital that treated you. If you no longer have the original bills you will have to do some leg work.
  2. Make sure the collection agency is in fact legitimate. I have seen where collection agencies have changed information illegally to reactivate a debt that was no longer legal to collect on. There are scams concerning collection agencies. Be cautious about turning over personal information.
  3. Make sure you do not automatically take responsibility for the debt when you first talk to the creditor or a collection agency.
  4. Contact the original creditor for the debt. Ask for an itemized accounting of your charges and total debt.
  5. Compare the information you received from the doctor and compare it to the medical collection on your credit report.
  6. Make note of any discrepancies.

Often medical bills are mistakes due to insurance errors. Either the medical coding was completed incorrectly by the doctor’s office or the insurance company may have made a mistake. Either way, incorrect information, may be a violation of the Fair Debt Collection Act.

Request Debt Verification From The Creditor

Under the Fair Debt Collection Act, the creditor bears some responsibility in proving the debt is yours. Once a debt collector contacts you, they must send you a written validation of debt within five days of contacting you. If they do not then you can send a letter requesting that they validate the debt.

Once you have sent a written debt verification request letter to the collection agency, they have certain rules they must follow. Make sure you send any correspondence registered or certified mail to verify the dates that you made the request. If you dispute the debt within 30 days they must stop all collections until the dispute is verified. If you have not disputed the debt within 30 days then they can continue to collect the debt.

The FTC outlines the contents of the letter that you should receive:

  1. How much your debt is.
  2. Who you owe and who currently hold the debt.
  3. A statement giving you 30 days to dispute the debt,
  4. Notification that, if you dispute the debt in the given 30-day time frame, the collector will mail you the verification of the debt.
  5. A statement that the bill collector will provide the name and address of the original creditor. You must request that information within 30 days.

**The failure of a consumer to dispute the validity of a debt is not to be considered by any court as an admission of liability by the consumer.

In other words, if you do not dispute the debt it is not mean that you are admitting it was yours.

What If I Do Not Receive A Response From The Collection Agency?

This could mean one of a few things.

  • The collection agency could not verify the debt at all.
  • The collection agency did not have enough information about the debt to verify it and is still collecting it.
  • Your request got lost in the shuffle and it will most likely, be dealt with.

This is important to note. If you do not receive the verification within the time frame it does not mean that it is not coming eventually. There is no set time limit for the debt collector to respond. Meanwhile, it will still remain on your credit report. For this reason, you will want to dispute it immediately.

This may or may not be the end of the matter. It is something you will have to keep abreast of. You will want to make sure you address any correspondence from the collection agency. The longer you ignore it the more costly it can become.

What If The Debt Is Verified?

You will need to decide whether or not you are able or obligated to pay the debt. There is a statute of limitations on how long a creditor can report the unpaid debt. If you are just a few months away of it falling off your credit then you may not want to pay it and just wait.

Once you have established you want to pay it and are able to work something out with the creditor, it is best to call. Letters to collection agencies can get lost in the shuffle.

Most creditors will negotiate the debt depending on what the collection agency has paid for it. In my experience, they generally pay 25% on older debts and are willing to settle for 50% of the original debt amount. They make some money and you save some money. Again the older the debt the better in these situations.

Sometimes they have not paid for the debt at all. They may be just servicing the debt for the original creditor. They only way to find out is to call and start the conversation.

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How do medical bills affect Credit. My Credit Track.

Tricia Snow

Tricia Snow has worked in the banking and financial services industry for over 20 years. She has helped 1000's of clients obtain the financing they needed to purchase their dream home or start their own business.

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