How Medical Debt Can Ruin Your Credit Score

Last Update: February 5, 2021 Credit Report Debt

The most common debt.

Research by the Consumer Financial Protection Bureau has indicated that a tremendously large number of collection notices on credit reports result from outstanding medical debt. Medical debt poses a risk to everyone, young and old, and whether you have health insurance or not.

It is estimated that about 65% of people with medical debt are actually insured, many through employer-sponsored plans. The bad news is that medical debt handed over for collection can lower your credit score by more than 100 points. Even more unsettling is the fact that medical debt collection notices may stay on your credit for 7 years, even after you have paid off the bill.

You can help prevent medical debt from ruining your credit rating easily.

How to Keep Your Credit Score from Being Ripped to Pieces by Medical Debt?

  • Keep track of your accounts, so you are not surprised by unpaid medical bills. Don’t take for granted that your health insurance will pick up every charge. It could be for something as simple as an incorrect coding paid to the wrong account. Consistently monitoring your statements and querying anything that seems unusual will eliminate future unpleasant surprises that may be lurking in the shadows.
  • Always stay in your network. Sometimes even if you are booked into an in-network hospital, you may be treated unknowingly by an out-of-network doctor or specialist. This is a major way of landing up with unexpected medical expenses. If this has not been clearly explained to you, you would be in your rights to contact the provider and ask to be billed at their in-network rate. You may be successful in getting the lower rates.
  • Although you may have health insurance and be very careful about staying in your network and diligent about checking your accounts, medical bills can still pile up for services not covered and be difficult to pay. Work out a payment plan with your provider if you are struggling to pay. Providers send unpaid bills to collection agencies, which in turn will report the debt to credit bureaus if it remains unpaid. This will go onto your credit report, negatively affecting your score.
  • It may be that your debt has already gone to a collection agency. You can also talk with the agency to send it on to the credit bureau. You can offer them a payment plan if they will, in turn, hold off reporting the debt to the bureaus. Surprisingly, most collection agencies are not keen to report the debt to the credit bureaus and often take what they get, as long as you stick to the agreement.

If you are struggling with a hospital bill, you may have an option to apply for financial aid, as many hospitals are required to offer some form of financial assistance. You could qualify, but you will have some extra time to gather the payment funds even if you don’t.

What if You Don’t have any Health Insurance but Still Need Medical Care?

The US federal government fund two kinds of specific health care plans, namely Medicare and Medicaid. These plans are specially designed for the elderly who are over 65 years of age, the needy, and the young.

  • Medicare is a plan that pays for the elderly (over 65) and certain disabled folk. It consists of 2 main parts. One of them pays for hospitalization care in a skilled nursing facility, medical care, and medications and equipment such as walkers and wheelchairs. Another part covers doctor and specialist visits, outpatient treatment, home care costs, and other services for the elderly and disabled.
  • Medicaid is a shared government and state program that provides health and nursing home cover for certain low-income people. This group includes children, pregnant women, parents of eligible children, caregivers, people with disabilities, and elderly folk needing nursing home care. Others who are eligible to receive Medicaid cover are those who are recipients of government welfare, whether in cash or kind.

Don’t Get Sick!

The best way to ensure that your credit score is not ravaged by medical debt is not to get sick! This is a very impractical suggestion, and of course, is not meant to be taken seriously!

A study published in the American Journal of Medicine revealed that medical debt is a major reason for bankruptcy. It reported that 20% of people in the national credit reporting system have medical collection notices on their reports.

It also gives credence to the fact that American consumers are faced with extraordinarily high healthcare costs in the US, which is rated as one of the most expensive places in the world to get ill.

You can help to prevent your credit score from falling apart by regularly paying attention to your accounts, querying treatments that were not paid for, asking the right questions about your network services, and being proactive about negotiating payments with providers for accounts that have to be paid, before they land up at collection agencies.

Get Nothing for Granted

When you go to the hospital, it is not only your health that is at stake. Your financial health can also dive if you are not diligent. The medical industry does not always explain the nitty-gritty of how extra charges can occur.



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