Medical debts are unsecured, so there’s nothing a hospital, emergency clinic, or doctor could repossess if you don’t pay your bills. Their only recourse is to turn them over to a bill collector. And we don’t have to tell you how stressful dealing with one of these collectors can be. You could be getting several harassing phone calls every day – even in the morning before work or in the evening when you’re just trying to relax.
How medical debt affects your credit score
The damage that medical debt does to your credit score can be terrible. Bankrate has said that medical debt that’s reported to the three credit bureaus can slash your three-digit FICO credit score by as much as 100 points. As an example of this, suppose your score was 710, which is considered “good,” and your medical debt dropped it by those 100 points. Your new score would now be considered “fair.” But if you’d had “fair” credit (601 to 660), those 100 points could drop it to “poor.” This would make it much harder for you to get new credit and would increase your interest costs substantially.
How to keep unpaid medical debts from being reported to the credit bureaus
If you can keep your unpaid medical debts from being reported to the credit bureaus, there’s no way they can damage your credit score.
Beyond this, one thing you could do is use a medical negotiation company. They have billing experts that will review your bills for coding errors and overcharges that are inflating your bills. They may also negotiate with your medical providers to get your bills reduced, in exchange for a percentage of the amount they save you.
Another option would be to get a low-interest debt consolidation loan and use the money to pay off those medical debts. That way, you’d have only one payment to make a month, and it should be far easier to make that payment than continuing to argue with your providers.
Your unpaid bills won’t be reported to the credit bureaus until they’re turned over to a bill collector. Once this happens, there’s not much you can do about it. However, if they have not yet been sent to a collection agency, you should contact your providers and try to negotiate with them. For example, you might be able to convince them to not send your bills to a collector in exchange for making partial payments.
Negotiating with bill collectors
If your medical debts haven’t been turned over to a bill collector, it’s possible to negotiate with the company. But before you do this, make sure the bill hasn’t passed your state’s statute of limitations. While this varies from state to state, it’s usually five years. Be sure to check and see when you were initially billed, as the statute of limitations on it might have expired, so you would no longer be liable for it.
If the statute of limitations has not expired, you could negotiate to reduce your balances. Remember what you read above that medical debts are unsecured debts, and thus, subject to negotiation. You could start by offering a lump sum payment of 25% of your balance. If the collector refuses this, go a bit higher. The fact is that most people are able to negotiate settlements of their medical debts for much less than they owed.
If you are able to settle the debt, be sure to get everything in writing. If you fail to do this, your bill might be reported as a partial payment instead of payment in full.
Negotiating with bill collectors over the phone can be intimidating, but it won’t be if you use the information you’ll learn in the following video.
How to get medical bills in collection removed from your credit reports
If you’re struggling with medical debts, you’re not alone. Forbes has reported that medical debt is the number one cause of personal bankruptcy in the United States.
You could check your credit reports and find that medical bills you had paid off were still there. Unfortunately, if the information is accurate – that you did have medical debts that had gone to collections – there’s not much you can do about it. The good news is that they become less important as time goes by. In other words, a medical debt that’s four years old will not have as much of an effect on your credit as one that’s a year old.
The second piece of good news is that Fair Isaac Corporation, the company responsible for your FICO score, announced last year that it’s now calculating scores differently. The company’s new FICO 9 model weighs medical debt in collections less heavily than other types of debt and does not even consider accounts that have been paid in full. This means that your medical accounts will still appear on your credit reports, but will not have as much of an effect on your score. In fact, according to the Fair Isaac Corporation, this could boost your credit score by 25 points.
The best thing is always to pay off your medical debts before they are sent to a bill collector. You may be able to stave this off by negotiating with your providers. Failing this, you might be able to negotiate with the bill collector to get your balances reduced. If all else fails, and your unpaid debts show up on your credit reports, take heart because they’re at least not doing as much damage to your credit score as previously.