If an avalanche of medical bills has hit you, we can empathize. As you may have read, healthcare costs continue to rise dramatically and with no end in sight. It’s possible that Obamacare will help slow down the increase but it may be several years before we know this one way or another. In the meantime if you’ve been slammed by medical bills, you may be wondering the effect it will have on your credit report.
No affect at all
If there’s any good news to being hit by big medical bills it’s that it won’t have any effect on your credit score or credit report. Healthcare providers usually don’t report their uncollected bills to credit bureaus. That’s the good news. The bad news is that these debts are still on their books. As a result, the financial officers in hospitals sometimes clean things up by selling those debts to collection companies. The really bad news is that these professional collectors will not only hound you indefinitely, they will report your debts to the credit bureaus. Plus, they have a knack for calling you just before you apply for a mortgage or some other kind of loan or when you’ve applied for a job – so you know that your credit report will be reviewed.
Have you seen your credit report recently?
The only sure way you can know what’s happened with those medical debts is to check your credit report. You actually have three credit reports, one each from the three credit-reporting bureaus – Experian, TransUnion and Equifax. They are required by law to give you a copy of your credit report free once a year. If you don’t want to go through the hassle of contacting each of the credit reporting bureaus for your credit report, you can go to the website www.annualcreditreport.com and get all three of them simultaneously. Again, this will be free – at least once a year.
What to look for
When you get your credit reports you should review them carefully looking for the following negative items.
- Charge-offs
- Debt collections
- Bankruptcies
- Foreclosures
- Tax liens
- Lawsuits or judgments
If you find one or more of these items you can bet that it’s having a negative effect on your credit score. This is assuming that they are not errors. If you find negative items that you believe are not yours, it’s critical that you dispute them. All three of the credit-reporting bureaus have online forms where you can dispute items. You will need to have documentation backing up your claim. The credit bureau is then required by law to contact the company that supplied the information and ask it to be validated. If that company is unable to validate the debt or if it doesn’t respond to the credit bureau within 30 days, the bureau must remove the item from your file. As you might imagine, this could have a very positive effect on your credit score.
The ultimate answer
Of course, the ultimate answer to medical bills is to pay them. This will not only keep them from going to collection but do you really want to owe money to a provider that you may need again in the future? Let’s suppose that you owe $1500 for a colonoscopy. You’ll probably need another one in five years. Do you want to go back to that gastroenterologist owing him or her $1500?
Seven long years
Did you know that negative information will stay in your credit report for seven years from the time of your delinquency? But that’s not the important fact. The important one is that if you make a payment on an old debt, it could restart the clock. In other words, it could have been five years since that debt was sent to collection but if you make a payment on it, you could be liable for more years.
What you need to do
There are several things you should do if you’re faced with a mountain of medical debts.
Check the statute of limitations in your state. Every state has a statute of limitations on debts. This can be as few as five years or as many as 10. In any event, you should check with your state’s attorney general’s office to see what is the statute of limitations where you live. If you have some really old medical bills, the statute of limitations may have expired so that a collection agency could no longer sue you.
Try to negotiate a settlement – if the statute of limitations has not passed, you should contact the hospital, clinic or doctor that provided your services and try to negotiate a settlement. Your medical provider will probably be very interested in settling with you if the statute of limitations has passed.
Get any agreement in writing. If you are able to negotiate a settlement, be sure you get everything in writing before you make any payments.
Keep your proof of payment and settlement agreement just in case a debt collector contacts you.
Your other options
If you can’t pay those medical bills and the provider won’t settle with you, you do have some options. For example, you could pay off the debt with a credit card(s), which would allow you spread out your payments over a number of years. Second, you might be able to find a foundation that would give you a grant to pay off those bills. Finally, you could declare bankruptcy, which unfortunately is what many American’s have done. In fact, medical bills are now the leading cause of bankruptcies here in the U.S. If you’re facing such a mountain of medical bills that bankruptcy seems like it might be a good option, watch this video.
