Medical Bills and Credit Rating
Medical Bills and Collection Agencies
Everyone watches their credit rating and if you don’t pay a bill you are usually aware that you didn’t pay the bill but medical bills can go unpaid and you will not even know it. Your credit rating gets affected and you can spend a lot of time and money trying to figure out what happened. If you have health insurance you are not immune from this happening to you.
Let’s briefly go through the process of what happens with medical bills so you can learn how to prevent this from happening to you and damaging your credit rating.
Your physician submits a bill to your health care organization or insurance company. For whatever reason, payment is delayed or denied entirely. Meanwhile, you don’t pay the bill and you may not even know a bill hasn’t been paid.
The physicians office then turns the matter over to a collection agency and the collection agency reports the debt as delinquent to the credit reporting agencies — Experian, TransUnion and Equifax.
Healthcare providers don’t want to be in the business of extending credit. If they were to report unpaid bills directly to the credit reporting agencies, they have to follow a lot of rules and regulations that creditors must follow when reporting debts. To avoid those, the providers prefer to use collection agencies.
Collections are weighted more heavily than other unpaid or late bills when it comes to your credit rating. So getting these on your credit report does hurt.
Legally, even though you have health insurance, you are ultimately responsible for your medical bills and that unpaid bill will appear on your credit report.
Even as you are in the process of discussing the bill the bill can go to collections. Small bills are not really worth it to the collection agency so they won’t try to collec,t they will just report the unpaid balance to the credit agencies.
Because of privacy laws, when you look at the report you may not be able to tell where that particular bill came from.
So what can you do to prevent this from happening to you? Here a few simple steps you can take:
1. Stay in touch with the billing office of your doctor or other provider during any type of delay. Ask them to get in touch with you if there is a problem. Those people have tough jobs and sometimes people get angry at them. Be polite and respectful to them and most of them will be glad to help you. Explain that you don’t want the bill to go to collections.
2. If they seem unwilling try to remind them gently that they provider will receive much more in payment if you pay your bill rather than if they turn over the account to a collection agency.
3 If you have worked out a payment plan with a hospital or other provider, be sure you pay it on time or let them know if you are going to have problems. Hospitals are really bad about sending bills to collection agencies after even just one late payment.
You may think no one cares but sometimes just a phone call saying we are having trouble and will be late with the payment can help. They may renegotiate with you or find another way. Don’t be embarrassed. I speak from personal experience, just try.
4. If your bill has already gone to collections and the agency calls you offer to pay the right away if the following conditions are met:
The agency will have the bill removed from your credit report.
(if you pay first and then ask to have the bill removed, you
won’t have any leverage)
The agency will give you a copy of this agreement in
writing. (If there is a dispute, you will need that written
proof.
5. If the collection agency calls you before they report, offer to work out a plan and get them to give you written confirmation if you pay they will not report you.
It is hard to believe you credit rating can be affected even when you have health insurance and would pay the bill if you knew about it. Being aware that this problem exists and knowing how to prevent it puts you way ahead of the game.
Banks are also notorious for being inflexible about fees and such. If you want to get the upper hand with your bank see our post Avoid Unfair Bank Fees
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