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Skimpy hospital gowns, painful shots and subzero temperatures in your doctor's exam room aren't always the worst part of getting medical treatment. Receiving a hefty medical bill after a doctor or hospital visit can be an especially bitter pill to swallow. In addition to depleting your bank account, medical bills can affect your credit if you don't pay them on time. The key to curing the problem is to take action. Here's what you need to know to prevent medical bills from hurting your credit score.
Do Medical Bills Affect Your Credit?
Simply receiving a medical bill doesn't affect your credit score, of course. Neither does paying the bill a few days late. Medical bills affect your credit score only if a collection agency gets involved.
If you don't pay your bill and it becomes significantly past due, your health care provider may give up on collecting the debt from you and sell it to a collection agency. The collection agency then takes over the debt and starts contacting you to get payment.
When exactly is a bill past due? Each health care provider's office has its own practices. Typically, providers wait 90 days before turning your medical debt over to collections; however, some providers will wait 180 days, while others will wait just 60 days.
When exactly is a bill past due? To help standardize medical debt reporting and protect consumers' credit reports from being unduly affected by medical debt, the three major credit bureaus (Experian, TransUnion and Equifax) now employ a 365-day waiting period before unpaid medical collections debt appears in your credit history. This yearlong grace period is designed to give you enough time to correct any errors on your bill, pay the bill or get your insurance company to pay it, figure out a payment plan or otherwise resolve the problem. By taking action within the year, you can prevent medical bills from hurting your credit score.
How Long Do Medical Collections Stay on Your Credit Report?
Unpaid medical debt can stay on your credit report for seven years from the original delinquency date. Because your payment history is the biggest single factor in your credit score, accounting for about 35% of your score, having a collection account such as unpaid medical debt in your credit history can have a significant negative impact.
In recent years, health care costs have risen, making medical debt a serious burden for more and more Americans. In the U.S., the average inpatient hospital stay costs over $22,000, according to a study by the Institute for Health Metrics and Evaluation. The latest FICO credit scoring model, FICO 9, as well as the VantageScore 3.0 and 4.0 credit scoring models, all give less weight to unpaid medical collections than to other collections. FICO® Score☉ 9 also ignores collection accounts if the original unpaid balance was less than $100. In addition, all three major credit scoring agencies will remove medical collections debt from your credit history once it is paid off by an insurer.
The problem is, different banks and lenders may use different credit scoring models. When you apply for a car loan, mortgage or credit card, you won't know exactly which credit scoring model is being used, so you have no idea how heavily medical collections debt is weighted when determining your creditworthiness.
Clearly, unpaid medical collections bills can leave your credit score in critical condition. To keep your credit score healthy, you should do everything in your power to prevent a medical bill from ever going to collections in the first place.
How to Keep Medical Bills off Your Credit Report
The good news is that in most situations, a little vigilance, knowledge and organization are all it takes to keep your medical bills from going to collections. Take these steps when you're planning any doctor visit or medical procedure:
- Know what to expect. Get familiar with your health insurance plan so you know exactly what it covers, what it doesn't and what your copay will be for a visit or procedure. Armed with this information, you're less likely to make costly mistakes such as visiting an out-of-network doctor or not asking for a generic version of a prescription drug.
- Keep track of your medical bills. Make it a habit to read any letters, emails or other communications from your health care provider as soon as you receive them. That way, you'll catch mistakes quickly and can contact the provider to iron out any problems right away.
- Make sure the charges are accurate. Medical offices and insurers make mistakes. Simple human errors such as miscoding a medical procedure can result in incorrect charges. Review each medical bill carefully and compare it against your insurance company's benefits to see if you're being charged the correct amount. If not, contact the health care provider's billing office, your health insurance company or both to let them know. After a hospital stay or complex procedure, ask for an itemized bill so you can check specific charges for accuracy.
If you don't have health insurance or your insurance doesn't cover the visit or procedure, find out ahead of time how much you can expect to be charged. (You probably won't get an exact figure, but you can get a range or estimate.) This is also a good time to find out if the health care provider offers any payment plans or accepts medical credit cards, such as CareCredit.
If you recently had a procedure or visited a doctor and haven't received a bill, contact the health care provider to make sure they have your correct address and that you didn't miss a bill. Do you receive bills by email? Make sure to add your providers to your email address book so their messages don't get lost in your junk or spam folders.
What if you've done all of the above and still end up with a medical bill you can't pay? Don't panic: There are a few options that can help you keep the bill from going to collections.
- Try to negotiate your medical bills. The best time to negotiate medical costs is before your treatment or procedure, but you can also try to do so afterwards. Some health care providers charge lower rates for patients who don't have health insurance and are paying out of pocket (known as "private pay"). Websites such as Healthcare Bluebook and FairHealth let you research the average cost of specific procedures in your area. You can use the information to choose care providers and as leverage to negotiate lower prices.
- Work out a repayment plan. What if your health care bill is as low as it's going to get, but it's still more than you can pay? See if you can set up a monthly payment plan with the provider. Many providers would rather work with you than send the bill to collections. Contacting your health care provider's billing office immediately to discuss repayment will show you're acting in good faith (and will give you more time to pay the bill).
- Keep an eye on your credit report. Are collection agencies calling about a medical debt you've never heard of before? Legitimate medical debts sometimes go to collections without you ever receiving a bill. This might happen if your provider has an incorrect address for you or if your mail is misdelivered. If you have a common name, it's possible you're being charged with someone else's bill. Finally, some collection calls regarding medical debt are scams. Before you panic (or pay anything), ask the collection agency to provide proof of the debt in writing. Under the Fair Debt Collection Practices Act, they must give you this information within five days.
The best way to avoid getting blindsided by a collection agency? Get a free credit report on a regular basis and review it carefully. If you find errors or any suspicious activity in your credit history, contact the credit reporting agency right away to set the record straight.
Prevent Medical Bills From Hurting Your Credit Score
Medical treatment can leave a scar, and when it leads to a big medical bill you can't pay, it can also leave a mark on your credit score. This is one situation where an ounce of prevention is worth a pound of cure. Take a few simple precautions whenever you get medical treatment, and you'll help keep medical debt from dinging your credit score.