If you have medical bills you can't pay they will likely end up on your credit report. This will negatively impact your credit score so it's good to get it taken care of as quickly as possible.
First, make sure the bill is legit and has been through the proper processes before being reported on your credit. Ask for a copy of the bill and talk to your insurance company about why they didn't pay. If the bill is correct and insurance can't help then try to work out a payment plan with the collection agency.
If you have a bill you can't pay but it hasn't gone to collections yet, see if the hospital can work out a payment plan or if they have a debt forgiveness program. That can prevent it from ever going to collections in the first place.
What Happens When a Medical Bill Goes to Collections
If you’ve got medical bills you haven’t paid, hospitals, clinics, and doctors might have their billing departments work to get you to pay. But what if you can't or won’t pay. Or the doctor or clinic can’t reach you. Maybe they have incorrect contact information and letters and phone calls go unanswered. What happens at that point?
Hospitals, clinics, and doctors’ offices don’t typically report directly to credit bureaus. But eventually, they will likely send unpaid medical bills to collection agencies. The collection agencies will then attempt to get you to pay the medical bill.
If you still do not pay the medical bill or the collections agent can’t reach you, the collection agency will report the unpaid item to credit bureaus.
And medical collections, like other collection items, do affect your credit report negatively. They can affect your ability to get credit, and they can affect the interest rate you pay when you get credit. Here's how long negative information stays on your credit.
How Does a Medical Collections Item Affect My Credit?
Lenders use credit bureau scoring models to determine whether or not they’ll give you credit and what interest rate they’ll charge you. FICO 9, the most recent FICO scoring model, and other scoring models such as VantageScore 3.0 and 4.0, don’t weigh medical collections as heavily as older scoring models such as FICO 8.
That means that with the newer scoring models, medical collections might not impact your credit score as heavily.
However, not all lenders are using the newer, updated scoring models. With previous models such as FICO 8, medical collections have just as heavy of an influence on your credit score as other types of collections.
And since payment history is the single biggest factor affecting your credit score, having unpaid bills of any kind can greatly impact your credit score no matter which scoring model you look at.
For this reason, it’s important to work to resolve medical collections (and other types of collections) as soon as possible. How can you do that?
How to Remove Medical Collections from Your Credit Report
The first step you should take as you work to remove medical collections from your credit report is to see if the reported collection item should be there in the first place. There are several instances in which medical collections shouldn’t be on a credit report, such as:
- If a medical collection item is more than seven years old
- If the collection item is less than 180 days old
- When insurance should have paid (or has paid) the bill
- In the case of billing mistakes
If a medical collection item is more than seven years old, write a letter to each of the credit bureaus asking them to remove the item due to the age of the item. If they don’t remove it, follow up until they do.
You can also call your insurance company to ask if they’ve paid the bill. If they have, ask them to send you a letter verifying payment of the bill. Once you get the letter, take a copy of the letter and send it to credit bureaus. Ask them to remove the collection item as it has been paid.
The 180-Day Rule
Also, credit bureau reporting agencies have a rule regarding medical collections: They wait 180 days before adding them to your credit report. This rule is in place in order to give consumers a chance to clear the bill.
Medical bills are in a different category than other bills. Because medical bill payment involves insurance companies, mistakes in payment status happen often.
And working with insurance companies to get a medical bill paid can be daunting. The 180-day rule is there to assist debtors as they work to determine the legitimacy of a medical bill.
However, mistakes can happen and medical bills in collection are sometimes reported earlier than they should be. So check the date of the collection, and contact the credit reporting bureau if there’s an error.
Check for Insurance Coding Errors
Finally, check with your insurance company if they haven’t paid the bill. Find out why they didn’t pay it. Sometimes there are errors, such as coding errors, that make medical bills ineligible for payment. Doctors and clinics can change the code on the bill, resubmit it and the insurance company could pay it.
Check for Billing Mistakes
In addition, the bill might not even belong to you. Be sure that the services you were charged for actually occurred. If you see something inaccurate on the bill, work to have the hospital or clinic modify it. Then, file a dispute with the credit bureaus explaining the situation.
If the Collection Item is Accurate
If after thorough research you find that the collection is accurate and truly belongs to you, it’s time to take action.
Call the collection agency and work out a payment plan. Once you have a plan, ask them if they’ll remove the item from your credit report. If they refuse, ask if they’ll remove it from your report after a certain number of on-time payments, like three or six. Collection agencies are often happy to work with paying customers.
And know that there is another reason a collection agency might be willing to remove an item from your credit report too: In the case of HIPAA violations.
If none of this works and you're thinking about credit repair, here's how to choose the best company.
HIPAA and Medical Collections Practices
It’s important to know that HIPAA regulations can affect the collection of medical debts. HIPAA (Health Insurance Portability And Accountability Act) was enacted, in part, to protect patients from unauthorized sharing of confidential health information.
Doctors and clinics must follow HIPAA regulations when treating patients. And collection agencies must follow HIPAA regulations when handling medical collections.
By law, collection agencies are not allowed to know the diagnosis and treatment of debtors from whom they are trying to collect medical debts. If they do know that information, it means that the medical provider (and possibly the collection agency) has potentially violated HIPAA laws.
How do I Know if the Collection Agency has Violated HIPAA Laws?
The best way to find out if the collection agency is aware of your diagnosis and subsequent treatment for that diagnosis is to ask them to provide proof that the bill is yours.
In the event that you discover through verification of the debt that the collection agency is aware of your diagnosis and treatment, you’ve just found yourself a loophole.
Tell the collection agency representative that they are not allowed to know this information and that they are in violation of HIPAA laws. Collection agency management personnel should know that this type of violation leaves them open to a potential lawsuit – and your bargaining power suddenly increases. Explain that you would like the item completely removed from your credit report upon payment in full, as opposed to the item being marked as a paid collection.
A paid collection item on your credit report still affects your credit standing and score. However, if the agency is willing to remove the collection item from your report, it’s as if it never existed.
Having a collection item removed from your credit report will do wonders for your credit score. So use HIPAA laws as a negotiating tool if you can while clearing up medical collection items.
How to Prevent Medical Bills from Ending Up on Your Credit Report
Of course, the best route to avoid having to deal with medical collections on your credit report is to prevent them from going to collections in the first place. Here are some tips for doing that.
Call the Medical Provider Early on to Verify that You Really Owe the Money
As soon as you get a medical bill in the mail, it’s important to talk with the proper people to ensure the bill is really legit. Work with the service provider and your insurance company to determine answers to questions such as:
- Were all of the services I’m being billed for actually provided?
- Was the bill run through insurance?
- Have the services that insurance won’t pay been properly coded?
Once you have verified that you are truly responsible for the bill you can take steps to get it paid.
Negotiate with the Hospital or Clinic Billing Department
With larger bills, it may be possible to negotiate with the service provider. Talk with them about charges that seem inflated. Ask about payment assistance programs. And ask if they have other options for negotiating outstanding monies owed.
If not, then you always have another option.
Pay the Bill or Work Out a Payment Plan
If the bill isn’t too large for your budget or for your emergency savings account, simply pay it. However, if paying it in full isn’t an option most clinics and hospitals will work with you to design an affordable payment plan.
Call the billing department of each medical provider you owe money to. Ask them to help you work out a payment plan that fits with your budget. Then make the payments on time until the debts are paid in full.
What if you’ve arranged a payment plan and then you happen to have a month where you can’t make a payment? If this happens, call the provider as soon as possible and let them know.
Explain the situation. Then work to get back on track with payments as soon as possible. You can also potentially pursue another option: Medical Debt Forgiveness.
Do You Qualify for Medical Debt Forgiveness?
Many hospitals and clinics offer some type of medical debt forgiveness program. In fact, I’ve used this type of program myself. Shortly after I was newly and unexpectedly divorced, I ended up needing emergency gallbladder removal surgery.
After health insurance covered their portion, I was left with over $5,000 in out-of-pocket expenses. I worked hard to whittle down the expenses, but I wasn’t getting very far.
That’s when I learned about medical debt forgiveness. I called the hospital that performed the surgery and asked if they had a medical debt forgiveness program. They did.
There were certain income and other qualifications one had to meet to qualify for the program. As a stay-at-home mom with limited income, I knew I might qualify.
The process of applying for the hospital’s debt forgiveness program was a bit tedious. There were forms to fill out and there was information to verify. In fact, I had to try a couple of times to complete the application process properly. But after the board assessed my application, they forgave all $2,000+ that I owed the hospital. What a relief!
If you’re struggling with medical debt, call the hospital or clinic you owe money to and see if they have a medical debt forgiveness program. They might not, or you might not qualify, but it sure doesn’t hurt to try.
Having medical collections on your credit report can feel overwhelming. Collection items will affect your credit score, and many lenders hesitate lending money to people with unpaid and overdue bills.
In addition, having a collection item on your credit report can affect other areas of your life. Potential employers often pull credit reports. And insurance agencies will look at credit reports to determine insurance rates.
If you’ve got medical collection items on your credit report, use the tips above to help get them cleared up and potentially removed altogether. Work to make your credit report sparkling clean!