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Many people are well aware of the financial burden that can come from unpaid medical debt. In fact, approximately 100 million United States adults have medical debt. Of those 100 million people, approximately 12% owe at least $10,000, if not more. Even though many people factor their healthcare into their monthly budget, many others are saddled with enormous medical bills from sudden illnesses or injuries. If they simply cannot afford to pay, those unpaid medical bills may end up being sent to collections. So, how does this affect your credit report? The Kentucky bankruptcy lawyers at O’Bryan Law Offices are here to explain how to dispute medical collections, as well as how to handle unpaid medical debt. To schedule a free consultation with us, please call our office at 502-400-4020 today.
Do Medical Bills Affect Your Credit Score?
Simply having medical bills will not affect your credit reports. However, after having unpaid medical bills for a significant amount of time, they may be turned over to medical debt collections. As of July 1st, 2022, a full year must pass before an unpaid medical bill can be turned over to collections. When this happens, you will likely begin to see these medical bills on your credit report.
This is when the situation tends to worsen. Payment history is one of the most important factors when it comes to calculating your credit score. If you have unpaid medical collections, this is likely to noticeably damage your credit report.
What Is the No Surprises Act?
The No Surprises Act protects those with certain types of health insurance policies from receiving surprise medical bills. Surprise medical bills are those that are unexpected because you didn’t know that your medical providers were out of network until you received the bill. Unfortunately, many consumers have endured surprise medical bills. However, the No Surprises Act aims to lessen the frequency of consumers being bogged down with a very expensive medical bill.
What Is the Fair Credit Reporting Act?
The Fair Credit Reporting Act (FCRA) aims to protect consumers by promoting privacy, fairness, and accuracy of the information within credit bureau files. It is a federal law that essentially regulates how a credit reporting agency may handle data from consumer reports.
How Medical Collections Affect Your Credit Score
After you undergo any kind of procedure, it’s safe to assume that your medical provider will not report your medical debt to a credit bureau. However, if your unpaid medical bills are sold to debt collectors, there is only a matter of time before the medical debt begins to show. As we stated previously, the three major credit bureaus do not show the medical collections on your credit report until one year has passed.
This one-year grace period is unique to medical bill reporting because medical bills themselves are unique. Let’s say that you do have health insurance, and the medical bill that you receive is for an expense that your health insurance company covers. Sometimes, a health insurance company may take months to approve and pay for your procedure. Any mistakes or errors along the way can lengthen the process even more. You may also need time to set up a payment plan.
The year-long grace period gives consumers the ability to sort out and manage their medical care bills before it begins to affect their credit report. However, it is important to remember that you should never ignore a medical bill. Once the grace period passes, the damage that a medical collection can do to your credit report is often long-lasting. In fact, unpaid bills can remain on your credit history for up to seven years.
Once you have paid medical debt down to nothing, the credit bureaus will remove the medical collections from your report.
Credit Score Changes
When an unpaid medical bill gets sent to a debt collector, it’s important to act fast. As soon as you receive the initial bill, review it carefully to ensure that there are no errors. If something is wrong, contact your medical provider and insurance provider right away. Resolve all your problems and ensure that your bill is covered by insurance.
If the bill is not covered by insurance and you can’t afford to pay, we recommend speaking with your medical care provider. You may be able to set up a payment plan rather than paying the expensive bill in full. Remember that the longer you wait to remove medical collections from your credit report, the more damage they will do to your credit score. More damage means going through a longer period of rebuilding your credit.
How Do Medical Collections Appear on Credit Reports?
Due to the recent changes implemented by the major credit bureaus, paid medical debt will no longer show on your credit reports. In other words, if you have paid your medical collection in full, it will be wiped from your reports. Consumers also have an extra 6 months (totaling one year) to resolve their unpaid medical debts. Additionally, Equifax, Experian, and TransUnion will no longer include medical debt in collections on credit reports that are under $500. This change goes into effect in the early part of 2023.
In general, unpaid medical debt does not show on your credit report unless it has been unpaid for at least 180 days. However, if your debt is sent to medical collections, this collection account will show on your credit report.
Can I Get Medical Bills off of My Credit Reports?
In certain circumstances, yes. Sometimes, people find that their bill has been sent to medical collection erroneously. They may not even discover the error until it has already caused a drop in their credit score. If your bill is less than one year old, or if your insurance provider finally paid the bill, you can ask that the collection accounts be removed from your credit report.
Disputing errors and ensuring that the correct information is on your credit report should always be your first priority when it comes to improving your score. Waiting too long and suffering a significant drop in on your credit reports can greatly hurt your chances of being able to borrow money, buy a house, or even buy a car. In the following sections, we will explain how you can work on removing medical collections from your credit report.
How Do I Deal with Medical Bills on My Credit Report?
It’s important to understand how to legitimately delete medical collections from your credit reports without reaching out to shady “credit repair companies.” While many credit repair businesses are legitimate and helpful for consumers, others are purely scams. Working with an experienced consumer bankruptcy lawyer has many perks, however.
Firstly, our attorneys are required to adhere to a certain standard, unlike many companies that solely focus on profits. We can provide legal advice about nearly anything you may encounter, including old credit card statements, payment records, how to prevent medical bills from going to a collection agency, and even how to raise your credit scores.
Our decades of combined experience allow us to analyze your situation and develop a plan that is unique to your financial needs. Below, we outline some of the ways we recommend dealing with a medical collection account on your credit report.
Check Your Credit Reports for Inaccuracies
As we mentioned previously, your first step should always be to carefully review your credit reports for errors. If you find any mistakes, you’ll need to submit a dispute letter to the three major credit bureaus.
Dispute with All Three Credit Bureaus
A dispute letter should include a few basic pieces of information, including what is wrong, why it’s wrong, and the supporting evidence for those statements. More specifically, your dispute should include the following information.
- Your contact information (name, phone number, and address).
- Confirmation number on your credit report.
- Outline each mistake clearly by sending a copy of each credit report with the errors. You should be able to obtain a free credit report directly from the credit bureaus.
- Explain the reason for your dispute.
- Request that the credit bureaus correct or remove the mistake.
Check Your Reports for Updates
Once the credit bureaus receive your dispute, they are required by the Federal Trade Commission (FTC) to investigate it thoroughly. They must also forward your dispute and all relevant documents to the furnishers, which are the agencies that provide consumer data to the credit bureaus. Once the bureaus have completed their investigation, they must report their findings to you.
After the bureaus and furnishers have corrected or removed the disputed information, continue to check your credit reports until you see that they are accurate. A debt collection agency must provide proof that your collection account is legitimate within 30 to 45 days. If they cannot, the Fair Credit Reporting Act requires all credit bureaus to delete the account from your reports.
Pay Off Your Medical Debts
You can also offer to set up payment plans to keep your account away from debt collectors. So long as you adhere to the payment schedule, you won’t have to worry about your account going to a collections agency.
Ask for a Goodwill Deletion
A goodwill letter basically asks your debt collector to remove your medical collection account from your credit report as soon as possible. This is a good idea if you have finally paid off your debt and you’re looking to completely erase it from your records as soon as possible.
Avoid Scam Companies
As we briefly discussed earlier, not every credit repair company is legitimate, nor do they always have your best interests at heart. Many companies offer financial services to desperate consumers, but all they end up doing is giving them more debt or simply taking their money. We highly recommend working with an attorney when it comes to removing negative marks from your credit reports. This will ensure that all of your financial interests are protected throughout the entire process.
Bring Your Debt Under $500
When January 1st of 2023 rolls around, consumer credit reports will no longer show medical collections under $500. Therefore, if you can pay your debt down by that time, it will no longer show on your credit report.
File a Claim Through Your Insurance Company
Another important aspect to remember is that credit bureaus will remove collections from your reports if your insurance company pays them for you. Reach out to your insurance provider and double-check if your bill was supposed to be covered under your plan.
Settle the Medical Debt with a Pay for Delete
Lastly, you can opt for a “pay for delete” agreement. This is essentially a negotiation letter between you and your debt collectors in which you ask them to remove a negative item on your report if you pay off one of your debts. If your debt collector agrees, they must remove the negative item after you pay your debt. This means the debt will no longer appear on your credit report. If it does still appear on your credit report, you may need to wait for another status update for the change to show.
Contact O’Bryan Law Offices for More Financial Advice
At O’Bryan Law Offices, our Kentucky bankruptcy lawyers handle much more than just bankruptcy. We help countless Kentucky and Indiana residents get their finances in order so that they can finally shed the stress of low credit scores and mounting medical debt. If you find yourself in a serious financial bind, our consumer bankruptcy lawyers are here for you. To schedule your free consultation with us, please call our office at 502-400-4020 today.