How Medical Bills Can Affect Your Credit

FEB 09, 2015

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Medical bills, especially for the uninsured, can cause significant financial strain that may take years to repair. In this difficult economic climate, consumers should understand how medical expenses can impact their credit.

Advances in medicine have resulted in a longer life expectancy, which eventually leads to increased medical costs, reports the National Consumer Law Center. Senior citizens may have the most difficulty keeping up with medical costs, as one in seven older adults reports that paying for medical bills was “very difficult” or used up all their savings, according to the NCLC.

In some cases of a sudden medical emergency, many Americans may accrue thousands of dollars in expenses that they are unable to pay. In the event that their insurance will not cover the bill, leaving them to pay out-of-pocket, hospitals may hand over any overdue balances to a collection agency, who will report the delinquency to credit bureaus.

“Typically, the doctor’s office is not the one reporting to the credit reporting agency, it is the collection service that is putting the ding,” Myvesta debt counseling service vice president and founder Mike Kidwell told Bankrate.

Similar to other delinquencies, the unpaid balance will negatively impact a consumer’s credit report and remain on file for seven years, Bankrate reports. In order to lessen the impact of a negative credit mark resulting from exorbitant medical fees, consumers have the option to explain the situation in a consumer’s statement of 100 words or less on the credit report.

Americans who owe a large amount in medical costs have options. Consumers should first consult their hospital about setting up a payment plan that may lessen the financial burden. According to the NCLC, some hospitals or organizations may offer charitable programs the help cover medical bills. As with any bill, consumers should also review all medical statements for procedural or billing inaccuracies.

Though medical bills are unsecured forms of debt, delinquencies that are added to a consumer’s credit report can cause just as much damage as defaulting on a mortgage or loan. Consumers facing medical debt should explore all options and maintain contact with hospitals and insurance companies to avoid receiving negative marks on their credit reports.