Medical bills are something almost every American has had to deal with at some point in their life. According to data from the Consumer Financial Protection Bureau roughly 43 million Americans have medical debt collections on their credit report. About one-third of them otherwise have flawless credit. A single medical collections account can drop your credit score by as much as 100 points.
Medical bills can be very frustrating to deal with. If you have insurance, sometimes you have to wait to see how much your insurance company is going to pay so you know what you owe. Sometimes this can take months and by that time the medical debt could already be in collects. We are going to cover ways you should handle your medical debt to keep it off your credit report.
Stay on top of the debt
You want to make sure you are staying on top of your insurance company about the debt. Continue to follow up with them to ensure they pay their part of the medical bills. Get an estimate of how much you will be on the hook for. Stay in communications with the hospital and surgeon about the medical bills. Let them know you intend to pay your bills so they do not prematurity send you to a debt collection agency. Being in constant communications with the doctor and hospital make is much less likely they will send the debt to a collection agency.
Ignoring the debt is the worst thing you can do, even though it can make you anxious, ignoring medical debt will only make it worse. Before you know it, the bills will be in collections, fees and interest may be added that substantially increase the amount you owe.
Dealing with Medical Collections before it’s reported to the Credit Bureau
Set up a payment plan
You do not have to make a payment in full. You can always set up a payment plan with the hospital, doctor or surgeon, or the collection agency agency. Payment plans can be set up for as little as $50 per month. As long as you’re making even the smallest payments on the account it will keep it off your credit report.
Negotiate a Settlement
If you do have the funds to make a large lump some payment on medical collections, you could offer a settlement payoff. Because hospitals and doctors only receive pennies on the dollars from a collection agency, they are more willing to take a lump some payment for less than the amount you owe. Contact the hospital or doctor and explain to them you can afford to pay x amount if they will forgive the rest of the medical debt.
Collection agencies are also willing to settle debt for less than the original amount owed. Collection agencies usually buy your debt for less than 15-20% of the original amount. Because of this they will often agree to settle the medical debt for up to half of the original balance.
Dealing with Medical Collections after it’s reported to the Credit Bureau
Once the medical bill is reported to the credit bureau, it will negatively affect your credit score by as much as 100 points. You have to deal with medical debt on your credit report differently. Simply paying collections will not improve your credit score.
Pay for Delete
A collection account has a significant negative impact on your credit score whether it’s a paid collection or not. Because of this you should never pay off medical collections unless the collection agency agrees to remove the derogatory account. A “pay for delete” is exactly what it sounds like. You agree to pay the debt and in exchange the collection agencies agrees to completely remove the account from your report.
Make sure you get a pay for delete letter from the debt collector. This way you will have it in writing that they agree to remove the account from your report after you pay off the account. When doing a pay for debt most collection agencies will not settle for an amount less than what you owe. If they are not willing to put it in writing that they will not remove the account, don’t pay it.
Paying a medical collection that is on your report will not increase your credit score unless it ‘s removed. If you pay it and they update the status to “paid” with a zero balance, it will do nothing to improve your credit score.
Disputing Medical Bills with the Credit Bureau
If the collection agency will do agree to a pay for delete, your next step is to dispute the account. You can dispute the account by mail, phone, or online with TransUnion, Experian, and Equifax. When you initiate a dispute, the collection agency has 30 days to validate the account. If they fail to do so the credit bureau has to remove the disputed account by law.
Medical bills are more commonly removed from credit reports than any other type of collection account. It may be due to the Hippa Act, limiting the amount of information the hospital can release relating to medical bills.
Be sure to include the following with your dispute:
- Full name and middle initial
- Date of birth
- Social Security number
- Addresses you’ve had in the last 2 years
- Copy of Drivers License or ID card.
- Copy of a phone bill, utility bill, or bank statement.
- List each account you think is inaccurate, the account number and the reason it’s inaccurate
Credit Bureau Dispute Address
Experian Dispute Center
P.O. Box 4500
Allen, TX 75013
Consumer Dispute Center
P.O. Box 2000
Chester, PA 19016
Equifax Information Services LLC
P.O. Box 740256
Atlanta, GA 30374
Randall has over 15 years of experience in the mortgage and credit industries. He spends a chunk of time helping consumers understand their credit, advise them on how to increase their credit, and lending his mortgage expertise to help them find the right type of loan. Randall lives in Dallas, Texas with his two sons.