How Unpaid Medical Debts Damage Credit Scores
When you’re recovering from injury or illness, paying bills might be the last thing on your mind. If so, you’re not alone: Medical bills are the most common form of delinquent debt in the U.S. But left unpaid, medical debt can add up to a world of pain.
According to the Fed, nearly 1 in 6 credit reports lists a medical debt collection. In fact, medical debt is the most common type of debt collected upon. More than one-third of Americans have seen their credit scores drop due to unpaid medical bills.
Having any type of collections account on your credit report can drop your score by up to 100 points, but medical debt is especially brutal. The higher your score to begin with, the more you may see it fall. A significantly lowered credit score will result in higher interest rates for loans and credit cards – and a really poor score may prevent you from even qualifying to borrow.
While the damage to your credit will lessen over time if you don’t rack up new negative items, it will remain on your credit report for seven years.
But damage from unpaid medical bills can be avoided.
The best way to eliminate medical debt is to simply not accumulate it.
Keep track of every doctor visit, medical office, hospital, laboratory, medical transportation service and medication. Medical bills often arrive from many different sources and up to several months after a service, which can make it easy to slip up and miss a payment. Claims get sent over to debt collectors anywhere between 90 and 120 days. With a record of your medical care, it will be easier to notice a neglected bill.
This may also make it easier to spot bills that aren’t yours. Astonishingly, up to 20 percent of medical charges are mistakes, whether they’re for incorrect amounts, services that were never rendered or costs that should’ve been covered by an insurance provider but weren’t for one reason or another.
When in doubt, financial experts recommend you pay the bill. You can contest a charge or request insurer reimbursement later. In the long run, it’s a lot easier to keep something from going into collections than it is to remove collections from your report.
But what if it’s too late and you’re already paying the price for unpaid medical debt? Bankruptcy may be able to help. Unmanageable medical debts are the biggest cause of personal bankruptcy filings. Chapter 7 bankruptcy in particular is geared to folks with unsecured debts like medical debt, though Chapter 13 bankruptcy may also be able to wipe out medical bills.
When it comes to your health, you shouldn’t have to make compromises to save money. But you shouldn’t have to live with the burden of debt for your choices, either.
If medical bills are spiraling out of control, the right bankruptcy plan can offer a solution. A good bankruptcy attorney can help you regain control of your debt – and your life. Contact DebtStoppers to discuss your financial situation with an experienced bankruptcy lawyer. Call us today to schedule your free personal debt analysis.