Can Unpaid Medical Bills Affect Your Credit Score

Our health is one of our assets, one that we should value as we slowly age. Anyone has the right to proper medical attention and can choose where to receive medical care. This is mainly why medical insurance has remained a greater concern for most Americans, even with the alteration on the existing health care law in the country that pushed the emergence of the ObamaCare.

“There are four types of health insurance plans available through ObamaCare’s Marketplace. They are Bronze, Silver, Gold and Platinum health insurance plans. Health Plans represent four tiers of coverage and are sometimes referred to as “metal plans” due to their quality corresponding to the value of their metal types. In other words a “Gold” plan is better than a “Bronze” health insurance plan. Aside from the 4 basic plan types, people under 30 and people with hardship exemptions can buy a “catastrophic” health plan through the marketplace. Catastrophic health plans have a low premium but very high out-of-pocket costs,” taken from the ObamaCare Facts page.

Yet even with the existence of assisted and non-assisted health insurance, there are people still struggling with their medical accounts. A serious injury or illness can put both your work life and family interaction on hold, while the bills accumulate after every visit for medical attention.

Don’t Let It Get To Debt Collections

An overwhelming health care bill can cause a lot of financial strain which could result to non-payment. Although the three major credit bureaus don’t have access to the frequency of the payments made, the medical provider can turn over the the debt to the collections agency anytime. This will be included in the credit report once collections take their hands on it, and credit reports are one of the basis in calculating the score. 

The longer the debt gets unpaid, the riskier it becomes and the probability of it appearing on your score is high. Lindsay Konsko wrote a brief but clear explanation of this issue. In Konko’s nerdwallet blog she said:

Failure to pay a bill affects the biggest portion of your credit scores: payment history. Consequently, having a medical bill in collections will probably result in serious damage to your credit scores. Collections can take up to seven years to drop off of your credit report, although the impact on your credit score will lessen over time. The newest version of the FICO credit score, the FICO 9, will weigh medical bills in collections less heavily than other types of unpaid accounts. However, it may take some time for the FICO 9 to be in widespread use by lenders.

Paying Collections May Not Help

When the medical debt is handed over to a collections agency, to whom should you send the payment to when you finally have the money? You must consider one thing first before sending out the payment to collections: the age of your debt. With FICO 9, all collection activity will be disregarded during score calculation once the debt is paid off, which is good news and favors the customer more.

However, not all lending firms uses FICO 9, which means you may not be able to enjoy the benefits of this customer-friendly calculation. In addition, the negative marks attained before the debt was sent to collections will still be included in the calculation of your score. Therefore, if the medical provider reported the delinquent account to the credit bureaus before turning it over to collections, it will still show on your payment history.

Talk To Your Health Care Provider

To avoid all this and prevent a greater damage on your payment history, continuously work with your healthcare provider until the debt is paid off. You can negotiate to settle with gradual repayment scheme or a reduced monthly (or bi-weekly) payment agreement so you can fully pay for the debt.

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