Understanding the Impact of Medical Bills on Your Credit

Medical care is essential for maintaining good health, but the financial burden of medical bills can be overwhelming. According to recent estimates from the Peterson Center on Healthcare and the Kaiser Family Foundation (KFF), over 3 million people owe more than $10,000 in medical debts, with millions more carrying smaller amounts. While unpaid medical debt can negatively impact your credit score, there are ways to manage and mitigate these effects. At O1ne Mortgage, we understand the importance of maintaining a healthy credit score, and we’re here to help you navigate these challenges. Call us at 213-732-3074 for any mortgage service needs.

Do Medical Bills Hurt Your Credit?

Medical bills will not affect your credit as long as you pay them on time. However, unpaid medical debt is treated differently from other types of consumer debt. Most healthcare providers do not report to credit bureaus, so your debt would need to be sold to a collection agency before it appears on your credit report. Typically, medical providers wait 60, 90, or even 120 days or more before selling the debt to a collection agency, depending on the provider.

Even after your bill goes to collections, the account may not show up on your credit report immediately, or possibly ever. The three main consumer credit bureaus—Experian, TransUnion, and Equifax—provide a 365-day waiting period to resolve any medical debt before the collection account appears in your credit history. This means that medical bills won’t impact your credit score right away if they are unpaid, and if the initial reported collection account balance is under $500, it won’t appear on your credit report at all.

Can Medical Bills Be Removed From My Credit Report?

If you have medical collections on your credit report that are inaccurate or the result of fraud, you have the right to dispute them with the credit bureaus. You should also contact the collection agency and the medical provider. If the dispute is settled in your favor, the accounts can be updated or removed from your credit report. These disputes are free to file and must be filed separately with each bureau that lists the incorrect information. Be prepared to provide evidence of your claim, such as records from the collection agency, insurance company, or healthcare provider, and copies of canceled checks or credit card statements showing that the bill has been paid.

Does Paying Off Medical Collections Improve Credit?

Paying off legitimate medical debt is always the best course of action, and it can significantly impact your credit scores. Unpaid medical collection accounts over $500 can appear on your credit reports and affect your credit scores for up to seven years. However, once you or your insurance company pays off a medical bill that was in collections, the account will be removed from your credit reports, which can have an immediate positive impact on your credit.

What to Do if You Can’t Pay Your Medical Bills

If you know you won’t be able to pay off medical bills on time, don’t panic. Here are some options that may help you manage your medical debt:

Negotiate Your Medical Bills

Healthcare providers are often willing to work with you because they prefer to receive some payment rather than nothing at all. Some providers offer substantial discounts if you agree to pay a lower amount in full or make a large down payment and then pay the rest over time.

Work Out a Repayment Plan

Your healthcare provider may be willing to break the bill down into monthly payments, making it more manageable for your budget. Be aware that any interest or fees the provider charges will add to the cost of the original bill.

Hire a Medical Billing Advocate

Medical billing advocates work with healthcare providers and insurance companies to help resolve medical bills on behalf of individuals. While the service isn’t free, it can be worth the cost, potentially saving you thousands of dollars and hours of time on the phone with insurers and provider offices.

Seek Financial Assistance

Depending on your income, you may qualify for help paying medical bills from Medicaid, local or state programs, religious groups, nonprofit organizations, and charities.

Use a Personal Loan or Credit Card

These should be your last resort options, as you’ll incur interest on the amount you borrow or charge. Avoid loans secured by your home or other assets, as you could lose them if you default. If you plan to use a credit card, consider one with a lengthy 0% APR introductory offer on purchases to provide extra time to pay off your medical debt without paying interest. Aim to pay off the debt before the higher rate kicks in.

Keep Your Credit Score Healthy

Even if you have a collection account on your credit report, there are steps you can take to improve your credit score. Make all your debt payments on time, keep your credit card balances low, and avoid applying for new credit unless necessary. Regularly check your credit report and score to monitor your credit health. You can get a free copy of your credit report from all three credit bureaus through AnnualCreditReport.com. Once the medical debt is paid off, ensure your credit report no longer shows the account.

At O1ne Mortgage, we understand the importance of maintaining a healthy credit score. If you need assistance with mortgage services, don’t hesitate to call us at 213-732-3074. We’re here to help you achieve your financial goals and secure a brighter future.