Medical Debt Reporting

Medical bills account for nearly half of all collection items on consumer credit reports.

Medical debt collection items account for almost half of all reported collection items on consumer credit reports. Fortunately for those individuals who have medical debt items on their credit reports, the newer credit scoring models such as FICO 9 and VantageScore 3.0 and 4.0 do not give medical debt items the same weight as other types of collections and as a result, they will not impact your creditworthiness as much.

How Does Medical Debt Affect Your Credit?

• Having outstanding medical debt can affect your creditworthiness very adversely if medical debt collections are subject to a judgement. Equifax, Experian and TransUnion have instituted a 180 day waiting period before they allow medical debt to appear on your credit history because of the period of time the insurance claims process can often take. So we recommend working diligently during the 180 day grace period afforded to consumers for the dealing of medical bills that come due. Every healthcare provider has its own guidelines as far as how long it will allow a consumer to go without settling a bill but most providers seem to wait 90 days before turning medical debt over to collections where other providers may wait only 60 days and some may wait for 180 days.

How Long Will Medical Debt Collections Remain On Your Credit Report?

• Even after medical debt is settled, just like other debt, medical debt collection items can remain on your reports for up to seven years unless settled items were paid off by insurance, in which case they are to be removed immediately upon payment. Still, even medical debt collection items remaining on your credit report won’t affect your credit score as heavily as other types of collections. But as long as they remain on your credit reports, they are seen by potential lenders all who weight debt differently. The credit score itself is only one variable in lender credit scoring models.

What Can You Do To Keep Your Medical Bills Off Of Your Credit Reports?

• If you have health insurance, do your very best to make sure you understand your coverage and the conditions of your coverage. Most insurance companies we’ve dealt with have very clear benefit descriptions and stipulations for coverage and in those instances where coverage isn’t clear, call the benefits department of your insurance company and have them clarify; and whenever possible, have them pre-approve in writing.

  If you don’t have health insurance, make sure you request and receive a written quote for the cost of your procedure or visit. Additionally, because health providers often have their charges adjusted by insurance companies, your provider may be willing to negotiate or discount their fees a bit depending on your history with the provider or practice. The best time to address the discount or negotiate a fee that may be more inline with what’s typically charged after an insurance company makes its adjustment is before you have the procedure.

  Of course, regardless of whether or not you have insurance coverage, if you’ve incurred medical debt, it will come to you in the form of a bill which may be emailed, mailed or sent to you via other communications as you may have requested. Do your very best to always check emails and mail often. Have noted where you can see easily, the fact that you will be receiving a medical bill and have also as a part of that note, the provider and provider’s billing phone number. Providers will often tend to extend your bill collection grace period if you are proactively communicating with the billing department; medical providers lose approximately 33% of their collections revenue to the expense of collections and as long as they believe you will pay your bill, they will consider holding off on sending you to collections.

When it’s all said and done, medical debt does not affect your credit score as much as other types of debt. But please remember that your credit score is only one part of your total creditworthiness. Lenders will see all the items on your reports and lend to you based on what they see which will be much more than the credit score itself. The best rule of thumb is to always be organized when incurring bills and communicate with your providers, even if you cannot pay a bill. You have more options when communicating before a bill goes to collection and most, if not all of those options, will not hit your credit score as viciously as if you don’t communicate at all.