Medical Bill Collections: Avoid Financial Nightmares

A Comprehensive Guide to Medical Bills and Collections: Breaking the Cycle of Medical Debt

Here’s the truth: millions of Americans with health insurance struggle to pay off their medical debts. An insightful analysis of consumer credit reveals that 1 in 6 in the U.S. struggle with medical debt in collections.

Medical billing billings and collections can be stressful, primarily when experiencing a health crisis. If you are delinquent, the debt could affect your credit report and hurt your perfect credit score.

But the good news is you can avoid medical bills ending up in your collections. Below, we discuss what it means for your medical bills to go into your collections agency and how they affect your credit reports. We’ll also dive into the ways you can improve your credit scores:

The Basics: What is a Medical Debt?

Medical debt arises from interacting with or visiting a healthcare provider like a doctor, nurse, physician, or clinic. According to research, up to two-thirds of medical debt cases result from a one-time medical expense due to an acute medical emergency.

People struggle with high medical debt because of increasing cost-sharing, expensive healthcare expenses, and lack of health insurance. Receiving a medical debt can hurt your credit score and healthcare-related accounts for most of the collections.

What Does It Mean for a Medical Bill to Go in Collection?

Your medical provider may send your debt bills to a collection agency if you already have delinquent medical debt. Many people paying delinquent or making a late payment can have their medical bills sent to a collection agency.

Once your medical collection agency receives your debt, they will make the first contact. If you fail to make payments for your medical care or procedures within a specified time, the agency might take the following steps:

• File a lawsuit for delinquent medical debt

• Garnish your bank account by getting a judgment from the court

• Place a lien on your home through the court

But worry not! The FDCPA and FCRA limit how a debt collector contacts you or a loved one. According to the federal law, medical collection agencies cannot do the following:

• Use manipulative or threatening tactics to force or deceive you into paying delinquent accounts

• Report delinquent debts to the three major credit bureaus- Experian, Equifax, and TransUnion- without contacting you

• Speak to other individuals about your debt without permission

• Ask you to pay medical bills you don’t owe

How Can Medical Collection Debts Ruin Your Credit?

Unfortunately, if you’re following your monthly payment plan, delinquent medical collection can hurt your credit card scores. But if your medical debt collections are under $500, they might not appear on your credit report nor affect credit scores.

In addition, most credit reporting agencies wait up to 12 months before adding delinquent medical debt to your credit report. So, you have ample time to settle your medical debt collection!

However, once reported, the delinquent medical debt can remain a negative mark on your credit report for up to seven years. That way, it can ruin your credit score, causing it to drop by 100 points based on the Fico score.

Steps You Can Take When Medical Bills Go To Collections

Once your debt collector contacts you about delinquent medical bills, you should consult your healthcare insurance company or provider to discuss payment options.

Your medical office may set up a payment plan based on your unique medical collection circumstances. If not, you can follow these seven steps to preserve your credit score:

Check Your Medical Bills for Accuracy

When paying delinquent healthcare bills, getting caught between your insurance company and medical provider is easy. You may struggle to understand the expenses of medical services and procedures, mainly if you receive medical care from many healthcare providers.

But before stressing about ways to start paying medical debts, you must ensure that your bills are accurate. You can determine whether your debt collectors are violating your rights by following these steps:

• Read your medical bills thoroughly to ensure the listed procedures and items refer to the treatment from medical providers you visited

• Check whether the medical bill is yours by matching your name, insurance provider information, and medical billing address.

• Request your medical provider to use easy-to-understand language to explain unclear items or procedures listed on your bills.

• Ask your medical debt collectors to verify your delinquent healthcare bills and offer in-depth information about the statements being collected.

Go Through Financial Assistance Options

You can discuss payment options with your healthcare provider if you cannot afford to pay your medical bills. Most healthcare providers and nonprofit organizations will offer financial assistance to help you pay off medical debt.

Furthermore, you can seek local or state social service groups to settle your medical bill.

Remember the Credit Reporting Timeframe

Your healthcare provider or debt owner, such as collection agencies, cannot report medical debts to the three credit bureaus or file a civil complaint until 180 days.

Your debt collector will typically inform you about this timeframe in written format. So, you can try to settle credit card statements within this period.

Understand the Statute of Limitations

The statute of limitations on medical debt defines how long your creditor can try to collect the unpaid medical bills. Although this differs based on your state, it doesn’t impact how long the debt affects your credit rating.

Typically, unpaid medical collection over $500 stays on your credit report for up to seven years!

Ensure Your Credit Reports are Up-to-Date

The collection agency will notify your credit reporting company once you convert unpaid to paid medical debt or reduce the balance to under $500. After that, the collection agency will remove the debt from your credit report.

However, you can contact your billing advocate if the collection account stays on your credit card report despite paying debt. Or, you can check your paid medical collection debt by ordering a copy of your report from the three credit reporting agencies.

Learn the Limitations of Medical Debt Collectors

Debt collectors can only make phone calls about valid medical debts. They cannot contact you or coerce you into paying paid medical debt.

So, ensure you pay off debt for your medical procedures, treatments, and services by asking the debt collector for verification. Remember that medical debts can stay on your credit reports for seven years, so it’s worth double-checking.

Furthermore, if the medical bills are yours, ensure the debt collector complies with the debt collection laws and requirements when reporting medical debt to the health insurance company.

Ways to Rebuild Your Credit After Medical Bill Collections

Rebuilding your credit with medical debt on your credit report can seem impossible, but there are several steps you can take to improve your credit scores. Here’s how to transform your financial health:

Pay Off Any Unpaid Medical Bill

The first step to building your credit report is to pay off any medical bill. In addition, focus on bringing past-due debts to current.

Make On-time Payments

Another excellent way to enhance your credit reports is to create a positive payment history on your accounts. That way, you can improve your credit score without worrying about the collection accounts.

Pay Your Credit Card Balances

Your credit utilization rate can impact your FICO score significantly. So, to improve your credit report, focus on paying your credit card balances monthly.