How to Keep Unpaid Medical Debt from Ruining Your Credit
If you have a medical bill that has ended up in collections then it has likely hurt your credit score a lot more than it actually should have. This was at least the conclusion that the Consumer Financial Protection Bureau came to after they studied over 5 million credit reports at the beginning of the year. This federal regulator kept track of how well the credit scores of people actually predicted how credit worthy they were after the medical bills appeared on their credit reports. They found that it didn’t in fact accurately predict how well people repay their bills. Those people that have medical collections usually paid all of their other obligations the same as those who have 10 points more on their credit score. Those that were able to pay their medical collections in full actually had scores that were 16 to 22 points higher than the average person.
Study’s Impact on Credit Score
The study didn’t exactly receive too much of a reaction from the various credit scoring companies. However, FICO, who is the creator of the leading credit score, stated that the very latest version of their formula will ignore minor collection accounts, and the next version that will be released will utilize a nuanced approach to considering a consumer’s collection data. This means that medical collections will impact nonmedical collections less. However this doesn’t mean that you should rely on this to protect your credit report and score from the impact of medical debt. The majority of lenders still use older FICO versions and will not be getting the upgrade any time soon. It’s not clear exactly how many will be willing to adopt the new version of the score right off the bat.
How To Keep Medical Bills From Ruining Your credit
It’s crucial that you take an active role in making sure that your medical bill does not completely sink your credit score. Luckily there are several things you can do in order to ensure that a medical bill ending up in collections won’t completely throw of your finances, and leave your credit score in ruins.
Be Aggressive When It Comes To Your Medical Bills
Don’t just assume that a hospital or doctor bill will simply get paid just because you’ve submitted it to your health insurer. Look at every medical bill that you’ve sent in as well as explanation of benefits that your health insurer provides you. If your medical bill still hasn’t been paid after a month or so then it’s time that you call up both your health insurer and your medical provider in order to find out the reason behind why it’s gone unpaid. Try to figure out a way that you can cut the red tape and get your medical bill paid faster in order to avoid collections all together. You should also follow up every month or even every week in order to ensure that your medical bill ends up getting paid. If you find yourself in an extreme standoff then you may want to consider paying the medical debt yourself and then seeking a reimbursement from your health insurer rather than allow your medical account to go into collections.
Ask For a Payment Plan
If you’re unable to pay your medical bill in full then try to contact your medical provider in order to seek a payment plan that you can reasonably do. Keep in mind that it is not a smart move to put your medical bill on your credit card, as this can accumulate a substantial amount interest, and if you’re unable to pay your credit card then you may end up with an even worse problem on your hands when your credit card bill ends up in collections. Instead, coming up with a payment plan usually allows you to avoid being charged any sort of interest. If your medical bill has already been given to a collections agency then ask that your medical provider take the account back in exchange for your making payments. If you find that your medical bills are overwhelming then ask that your medical provider give you financial assistance or some sort of discount on top of your payment plan.