Why and How Does a Medical Debt Affect Your Credit Score?

Medical debt happens. No matter how hard you try to ensure that you don’t accrue it, the majority of people in the United States end up with outstanding medical costs at some point.

Emergency care is one of the most common ways that this happens. Unlike a regular doctor, hospital emergency departments legally have to provide care to consumers whether they can afford that care or not. Given how expensive hospital care can be, this means millions of Americans rack up massive debts, sometimes with no way to repay them. 

Given how common medical debt is, it only makes sense that it is one of the main reasons why people struggle with debt overall. If this applies to you, you might be wondering if medical debt has any impact on your credit score – and if it does, what can be done about it? 

Here’s what you need to know:

What to Do First When You Have Medical Debt

Realizing you have outstanding medical debt might feel like cause for panic, but it doesn’t have to be. After all, there are a few options that you can try to resolve that debt before it becomes something you can no longer manage.

As soon as your first bill is issued, contact your medical provider. You may be able to negotiate your outstanding costs with them. Many medical providers make mistakes in billing, and if you simply ask for an itemized bill, you may find that some of that outstanding total mysteriously disappears. 

You may also be able to work out a payment plan with your provider, or with a debt collector that they send your outstanding debt to. But what happens once that debt is in collections? Are you going to see the impact on your credit report?

Does Medical Debt Impact Your Credit?

The short answer is yes – medical debt absolutely can impact your credit rating. However, it is much more complicated than that, since medical debt has different rules than most types of debt. 

The three primary credit bureaus – Transunion, Equifax, and Experian – all have a 180-day grace period that allows you to catch and resolve medical debts before they actually impact your credit report. That means that once an account is in collections, you can pay off that debt within six months and avoid having it show up on your report at all. 

Catching the debt during those six months can be trickier than it sounds, however. Each of these agencies may receive the collections information at different times, and even simple accounting errors can mean that your credit report takes a hit well before you are able to pay down the balance. What happens then?

What Can You Do Once Medical Debt Has Appeared on Your Credit Report?

Once medical bills have hit your credit report, there might still be something you can do. This is especially true if you feel that they are unfairly impacting your score. 

If you feel like you have already repaid your outstanding debt – or that it was reported incorrectly – you can dispute the report item with your credit bureaus. You will have to do so individually, filing a report with each of the agencies. It is free to file, and you will likely need documentation proving that you have already paid the amount that is being noted as outstanding. 

Remember, accounts are managed by humans and humans can and do make mistakes. Simply contact each agency and address your concerns to resolve those mistakes cordially. 

Should You Continue Paying Your Medical Bills?

With all of this in mind, you might be wondering if you should even bother continuing to pay your medical bills. 

It is true that many people stop paying these bills in favor of covering other expenses. Unfortunately, this is something many consumers have no choice in; when it comes down to affording groceries and gas or paying for medical debt that continues to mount, that debt often goes unpaid.

However, your best bet really is to pay down as much of those outstanding costs as possible. Why? Because newer credit score evaluators may take this into account. Recently paid-off debts may be removed more quickly in some cases. This can help your credit score to bounce back quicker if it has been damaged by your medical debt.

Additionally, paying off outstanding medical costs that have not yet gone into collections can prevent them from doing so. You may also be able to contact your medical providers or even some debt collectors and ask about reducing the total amount that you owe. Once something has made an impact on your credit, these options will no longer be possible. 

What Happens When You Can’t Pay Those Bills Anymore?

While it is always ideal to pay your debt down on your own as soon as it comes due, this isn’t always realistic. Most people end up struggling with some kind of debt during their adult lives, and medical debt is one of the most common types. 

If you have already exhausted your initial options – such as negotiating lower payments, getting financial assistance, and taking out lower-interest loans – it may be time to consider a more drastic option. Once debt becomes insurmountable, bankruptcy might be your best bet to end the struggle and begin rebuilding your financial future.

Ready to Get Help? Contact the Van Horn Law Group

It can be difficult to determine what your best option is when you are dealing with debt. That’s why it pays to consult with a legal professional.

At the Van Horn Law Group, we understand the impact of medical debt on a person’s life. Beyond worrying about its impact on your credit score and finances, it can cause tremendous stress and frustration. That is why we believe that providing experienced, knowledgeable guidance is our duty to our South Florida communities. 

Give us a call. Let us help you decide which path to take and how to best manage your medical expenses. Don’t go it alone! Let us walk you through the entire process from start to finish!