It happens to the best of us. You move, and make arrangements to change your address – but forget to update it for EVERY creditor, which may include medical bills. Common monthly bills are usually top-of-mind in situations like these. If medical bills aren’t among them, they’re easy to overlook.
So now you missed a bill and its subsequent payment – what’s the damage to your credit score? Are you looking at damaging your credit score forever, or is this a temporary ding to your good standing?
Can a missed medical bill affect your credit score? Yes and no. It can, but only if it ends up in collections. Fortunately, it takes time for medical bills to get sent to collections. It’s actually a much longer timeline than a missed credit card payment, for example. Time is still of the essence, however, as medical providers don’t wait long before sending your bill to collections.
If you wait too long to pay a missed medical bill and it hits collections, you can expect:
Just when does a missed medical bill hit collections and how long do you have to deal with the negative effects of it? Check it out below.
Here’s the fact of the matter. Medical facilities, including hospitals, don’t necessarily report to the credit bureaus directly. If you miss a payment, it’s not going to directly hit your credit report right away. If you keep ignoring it, though, it will.
Doctors, hospitals and other medical facilities don’t regularly report your bills to the credit bureaus. Just like with your utilities or insurance, no one knows what your bills or payment habits are except you. But once an unpaid debt goes to a collection agency, it’s a whole new ball game.
Most medical facilities must wait 180 days before they can send your bill to a collection agency. During that time, there probably won’t be any effect on your credit score. It’s once that bill hits the collection agency that you’ll see the change.
The moment your bill gets sent to a collection agency, it hurts your credit score. An open collection makes it nearly impossible to get new credit until you pay the collection. It affects your credit score in a big way, and ensures future lenders will turn you away.
If you’re lucky enough, you’ll catch the missed medical bill before that 180-day mark and can avoid worrying about any impact on your credit score. Do your due diligence as soon as you miss a bill – make sure the bill is correct and then pay it.
If you can’t pay it in full because you just moved and weren’t expecting the bill, work with the billing department. Many medical companies will allow payment arrangements or defer your payment due if you explain your situation. Ignoring the bill, however, lands it in collections, where the problems begin.
Be honest with your medical provider – tell them about the mistake and ask for more time to pay the bill. You may have to agree to a payment arrangement, where you pay it back in increments every month to keep the bill out of collections, but it’s worth it.
Just how much collections affect your credit score depends on a large number of factors that mostly have to do you with you. Believe it or not, the higher your credit score is at the time of the collection, the more your credit score may drop, because you have more points to lose. Lower credit scores may not feel the same effect, but it will still lower your score. If you already have a rock bottom score, it will make it even harder to pick up the pieces. The amount of the collection also determines how much your credit score is affected. For example, if the medical bill is for $100, it may only hurt your credit score by a few points. But if it’s for $1,000 or more, you’ll likely see a much larger hit to your credit score. Each of the three credit bureaus score differently, so you may see a different effect from each one if the collection agency happens to report to all three bureaus.
Collections stay on your credit report for seven years, but it’s the first two years that are the most important. As a collection ages, it will impact your credit report less, but it will still have a negative impact. In reality, as long as the collection stays open, it will hurt your credit score.
Most credit scoring models today don’t include paid collections in the credit scoring model. In other words, as soon as you pay the medical collection, it stops affecting your credit score. That doesn’t mean your credit score will bounce back overnight – it will still take time to build it back up, but you won’t have the negative information pulling your score down any longer.
Keep in mind, though, having a collection (even paid) on your credit report affects your chances with future lenders. They’ll see the presence of the collection and may inquire about what happened. Some may turn you away just for having a collection on your credit report— because it makes you look high-risk.
If you didn’t realize that you missed a medical bill until it hit collections, you have a bit of work to do to get it off your report:
Get to the bottom of it – Find out what medical bill you missed and look at the details. Is everything correct? Do you owe the amount the bill states? If not, gather your proof of the error and contact the medical provider. If you have insurance, grab your Explanation of Benefits. If there are other errors, such as wrong codes or wrong procedures stated, take it up with the medical facility.
Negotiate – If you know you owe the bill, try negotiating with the collection agency. If they added fees or interest, discuss a payment plan or payment arrangement. If you can pay the bill in full, try getting them to knock off the fees they added. The key is to give them something – any payment that will appease them, so they’re more willing to work with you.
Make your payments – If you get a payment arrangement, make sure you make the payments on time. Missing your payment arrangement payments can start the process all over again and have a negative effect on your credit score.
Pay the collection off – Once you pay the collection off in full or as agreed, it should show as a paid collection on your credit report. Make sure you verify this by pulling your free credit report. If it’s reported as ‘paid in full’ or ‘satisfied as agreed,’ it should stop affecting your credit score.
While you can’t get the collection removed from your credit report, you can get it to stop affecting your credit score —and that’s most important. With a paid collection on your credit report, you can explain the situation to future lenders. You can even write a Letter of Explanation stating the reason for the collection, what led up to it (moving and not providing a forwarding address) and how you rectified the situation. Sometimes just a simple explanation is all lenders need to overlook the negative information reported.
You may be able to dispute your medical bills with your healthcare provider. Remember, there’s plenty of room for human error in a medical office.
A nurse or doctor could accidentally write down the wrong type of procedure on your record. Or, the billing department might make a typo that leads to a higher cost. In these cases, you should be able to call the doctor’s office and get your bill corrected right away without much of a fight.
There’s also the possibility that your doctor’s office is charging way too much for a routine service. If you’re charged several thousand dollars for a procedure you think should cost less, call around to a few other offices and ask what they charge. You might find your doctor’s office is charging a higher price than others in your area. In this case, you might be able to get your doctor’s office to reduce your bill.
Regardless of if your bill is reduced or not, you want to make sure it doesn’t hurt your credit score while you try to dispute it. If the dispute takes more than 30 days, the billing department may send it to collections. This negatively affects your credit score, even though you’re trying to fix the bill.
You can avoid a bill going to collections during a dispute by contacting the billing department. Let them know you want to dispute the bill and ask them to put the due date on hold while you resolve the issue. This pauses your due date so you can work out a payment plan or get your bill reduced without worrying about missing a payment.
Any collections on your credit report, including medical debt sent to a collection agency, can stay on your report for up to seven years.
Luckily, recent changes to modern credit scoring models mean unpaid medical debt does less damage than other types of debt. That doesn’t mean you should ignore medical bills — you’ll still want to pay them on time if possible. It does mean, however, that you probably won’t feel the sting of a medical bill on your credit report as long as you would if you stop paying other types of debt, like a credit card or car loan.
A missed medical bill isn’t the end of the world as long as you take care of it. If you don’t and you choose to ignore it, you could end up with a collection on your credit report which hurts your credit score in big ways.
The best thing to do is be honest with your medical provider about the occurrence and do what you can to get the bill paid. If it hits collections, pay the bill as quickly as you can and keep the proof of payment. A paid collection won’t hurt your credit score any longer, but having the proof of payment and the reasons for the issue in the first place may be necessary when you apply for future credit.