You can plan, scrimp and save, but you can’t predict the future.
No matter your financial situation, you never know when you might experience an unexpected (and expensive) medical issue.
We can’t all have the best insurance (another issue altogether), so adding your medical bills to your financial situation can cause stress.
Before you start panicking, take a deep breath and relax. Knowing how something works is the first step toward tackling it head-on.
Luckily, when it comes to medical debt, the answers aren’t so cut-and-dry. The financial world offers a bit more wiggle room in these categories than, let’s say, your tuition on a mortgage.
In this article, we’ll explore what medical debt means and how it affects your credit.
Breaking Down Your Credit Score
A credit score is one of the most critical factors of your financial career, if not the most.
Credit scores are numerical values typically created by the major credit bureaus and can help you get your apartment, car, or house down the road. Your credit score is determined by combining your credit history: positively impacted by bills on time and negatively impacted by late payments.
Your credit score doesn’t change quickly. Like the government, it is creaky and slow. The late fees you make young will impact your credit score until you’re old.
That’s where medical debt comes in.
What is Medical Debt?
Medical debt is as simple as it sounds. If you don’t pay your health bills on time, they don’t just disappear. Instead, your waiting payments become unpaid medical debt. Like any bill, it’s critical to pay this off.
Whether these medical bills affect your credit score isn't so clear-cut. Let’s break it down.
Do Unpaid Medical Bills Affect Your Credit Score?
You’re in luck. The medical world brings a bit more leeway.
When it comes to paying debts, medical bills can be tricky. Often, payments are through health insurance, which leads to extra room for error, like a billing or coding error. For this reason, medical providers and credit bureaus offer more wiggle room.
Medical providers typically don’t report to credit bureaus, meaning your unpaid debts don’t get added to your credit, *so long as you pay them promptly.*
Don’t use this as an excuse to leave your bills unpaid. If you don’t pay your debts soon enough, the medical provider will likely report to a collection agency, which will remain on your credit score. They typically wait a certain amount before reporting, from 30, 60, or even 120 days. Ask your medical provider so you can create a payment plan.
How Collection Agencies Deal with Medical Debt
Once your bill goes to the collection agency, you’re not immediately screwed. The three major credit bureaus, Equifax, Experian, and Transunion, give a 365-day waiting period for any medical bills.
This period means you have a full year to pay your bill outside your provider's waiting period. Use this time wisely – not paying your medical bills will hurt you in the long run.
Remember: your paid medical debt won’t go through in an instant. Insurance opens room for error; pay off your debts as quickly as possible to ensure your credit score.
How Does Medical Debt Affect My Credit Score?
Let’s say you let the year and a half slide without paying your medical bill. What’s the worst that could happen?
The unpaid debt will be added to your credit score, making it harder to get loans, vehicles, and property – among other things. Medical debt appears on your credit score for seven years after your missed payment.
Still – even if you’re that deep – pay off your debt. Bureaus will remove the debt, which will boost your credit score. In the credit world, a little is a lot.
How to Pay Off Your Medical Debt
While paying off your medical debt may seem daunting, there are ways to tackle it effectively.
The first step: stay aware of your debt. While checking your bills can be frightening, there’s nothing worse than hiding away from them.
If you’re overwhelmed by the fee, ask for an itemized bill. This bill will provide you with a list of everything you’re charged. Make sure to verify your statement's accuracy to ensure no extra charges were added by mistake. Look into your insurance plan to see what they’ll help pay.
If you don’t have enough money, reach out to your provider to make a repayment plan. If they haven’t reported to collections, you can likely set up a monthly fee, which will slowly recoup the due. Of course, your provider doesn’t have to play along– they can still report to collections no matter how sweetly you ask.
By staying aware and making a plan, you’re one step ahead of the game. Somewhere down the line, you’ll thank yourself.
Keep Your Credit Health High
In many ways, you should treat your finances like you do your health.
Check your credit card history often to ensure you stay on your game. When making any payment, don’t bite more than you can chew. Keep track of debts and loans and pay them off as soon as possible.
Of course, medical debts are often unexpected, so if you can’t pay right away– we get it. Thankfully, your medical providers and credit bureau will cut some slack, but don’t take it as an excuse. Use it as a time to pay off the debt to keep your credit high.
At EXTRA, we deal with all the confusion and uncertainty of finance. Fun job, right? The credit world is often freaky and blinding, but the more you do it, the clearer it gets. Explore our blog for all kinds of articles and solutions. We’ll help you learn how to break down your credit report or teach you how to unfreeze credit.
And hey, if you’re here reading, you’re already on the right track.
Take this time to get your feet on solid ground. You’ll be healthy in no time.