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Dispelling a Credit Myth: Medical Bills Can Hurt Credit

Posted on May 7, 2011

When it comes to credit, what you don’t know can hurt you. Your financial profile can take a hit based on the information you do not clearly understand. The many myths of credit repair and credit scores can actually leave you in a worse situation than where you started.

The Reality of Medical Debts

One of these myths that is often believed by consumers is that medical bills do not hurt a credit score. Many times people will forgo paying off their medical bills to focus on their other creditor debts thinking that overdue medical bills won’t impact their credit score.

However, medical debts are treated just like any unpaid creditor debt. The money you owe is expected to be paid. The medical provider will not necessarily send the information to the credit reporting bureaus each month but they will pass your accounts to debt collectors. It is then that the unpaid debts will cause your credit score to drop and lenders will see your medical accounts are in bad condition.

Once an account goes into collections, regardless of the account type, you will not only have the drop in credit score, you will also have the seven-year reporting period that shows your late or missed payments. Lenders who are reviewing your credit report for lending decisions will be able to see that you are not responsible with on-time payments for all of your financial obligations. This may sway their decision to lend you money or lines of credit.

Collection agencies will also prove to be a constant in your life. Written correspondence and regular phone calls demanding the debt be repaid in full will become more aggressive. Once the medical provider sells a debt to a collection agency, the agency will do everything they legally can do to collect what is now their owed money. The medical provider likely has sold the debt to the third-party agency and has written your debts off as a loss. In order to stop the collection agency contact, you’ll need to settle the debt with them directly.

Other Consequences of Unpaid Medical Debts

Outside of the damage unpaid medical bills will do to your credit, you may also be destroying your patient reputation. Once you default on making payments to your doctor, you stand the risk of being dismissed as a patient. Medical professionals do offer repayment options, especially for those patients that do not have medical insurance coverage. If you did not opt for any type of assistance or special repayment plan, eventually the medical provider you did not pay can decide you are too much of a financial risk.

Not paying your medical bills not only can create a bad credit profile for your financial life, you may also be jeopardizing the relationship you have with your doctor. If you require medical treatment you can not afford, it is better to be upfront with your physician from the start. Find ways to repay the cost of the treatments before you start incurring high medical bills. Unless there is a dire life-and-death emergency, you should work with the physician’s office to formulate a payment plan that will allow you to keep up with medical bill payments and avoid ruining your credit and your patient/doctor relationship.

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