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A serious illness or injury can be disruptive. You need to heal, and you may be overwhelmed for a while as you put your work and family life back together.
There’s a strong chance your finances will be affected, too. If an unpaid medical bill makes its way to your credit reports, your credit scores could suffer for years.
Here's how unpaid medical bills affect your credit and how to deal with the fallout if you end up in collections.
Do medical bills affect credit?
Unlike a bank or credit union, your doctor’s office probably doesn’t have a direct relationship with the three major credit bureaus that collect data and isn't regularly reporting your payment information.
As of Sept. 15, 2017, there's a 180-day waiting period before unpaid medical debts can show up on people’s credit reports.
Eventually, your medical provider may turn over an unpaid debt to a collections agency. The collector will then contact you and try to get you to pay up. At this point, your unpaid bill probably is showing up on your credit reports as having gone to collections.
This is where things get messy, because the information on your credit reports is used to create your credit scores. Failure to pay a bill affects the biggest factor determining your credit scores: payment history. Consequently, having a medical bill in collections can result in serious damage to your credit scores.
There is a way out, however: Medical collections will drop off a credit report if the bills are paid by a health insurer.
Can medical bills be removed from my credit report?
If your medical bill is in collections by error and is hurting your credit score, you’re probably wondering if it can be removed. If the bill is less than 180 days old or if it has now been paid by insurance, you should be able to dispute it and have it removed. Here are the steps to take:
Gather evidence. Collect as much documentation as you can to prove the bill was paid. Ask for payment records from your doctor’s office, find copies of canceled checks or dig up old credit card statements.
File your dispute with any credit bureau that's reporting the error. Make sure to check all your credit reports from all the three bureaus.
Keep communicating. The Fair Credit Reporting Act requires the credit bureaus to follow up on all credit reporting error disputes. Keep communicating with the companies to check on the status of your dispute, and be prepared to provide additional documentation if requested.
There’s no guarantee the error will be removed from your credit report. But the effort is worth it because poor credit scores can make borrowing money really expensive.
What if insurance didn't or won't pay?
Medical debt collections have to come off the reports if the health insurance company pays up. But what if you don't have insurance, you can't get the insurer to pay or you get tired of waiting on insurance and pay off a collections account yourself?
The damage to your credit depends on the type of scoring model and the version used by a potential creditor to check your creditworthiness.
FICO 8, the credit scoring model most lenders rely on, treats collections accounts the same, no matter whether they're paid or unpaid. So the damage has been done regardless of whether you pay — although paying will get the bill collector off your back and remove the risk of it suing you for payment.
The FICO 9 scoring model and the VantageScore 3.0 disregard collections accounts that have been paid. FICO 9 will weigh medical bills in collections less heavily than other types of unpaid accounts. However, FICO 9 is not in widespread use by lenders.
Collections accounts can take up to seven years to drop off your credit report, although the impact on your credit score will lessen over time. To help your score rebound, the best thing to do is keep good credit habits, such as paying your other bills on time and keeping your credit card balances low.
Can I stop medical bills from landing on my credit report?
You can take some steps to prevent future medical bills from affecting your credit.
Follow up with your insurance company. Know the ins and outs of your insurance policy and follow up by phone or email to make sure the company is paying the bills it has agreed to cover. Many people end up in collections because they assume their insurer paid a bill that it didn’t.
Negotiate unmanageable bills. When you can’t afford to pay a bill, contact your medical provider and try to negotiate it down. If you’re successful, get the new amount you owe in writing so that you have a record of your agreement in case of a future dispute.
Consider hiring a billing advocate. If you’re overwhelmed by your bills and aren’t sure how to proceed, think about hiring a medical billing advocate. This professional can sort through your bills and try to negotiate them on your behalf.
Crowdfund your medical bill. Set up a fundraiser with a crowdfunding site such GiveForward to get help with your bills from family, friends and strangers — though it's not a surefire way to pay off medical debt.