Medical Bills Can Hurt Credit
Posted on August 28th, 2014
People in Arizona might not know that medical debt represents almost half of all reported collection accounts. Individuals often contest bills with their doctor or health insurer. However, it’s important for people to understand they can’t just ignore those bills. Medical debt can harm credit if a bill goes into collection.
According to the Federal Reserve, nearly one in six credit reports contain a medical bill in collections. Ignoring medical bills while sick or recovering from surgery can damage a credit score, making it difficult for someone to obtain loans at low interest rates. In fact, about two in five Americans reportedly had a lower credit score because of unpaid medical debt. Many consumer groups think medical bills should never show up on a credit report. However, there might be a partial fix with a proposed new bill that would give people a longer period of time to reach a resolution over a medical bill before it shows up on their credit report. In the meantime, FICO credit scores will no longer list collection items less than $100. Those small bills currently represent more than 33 percent of reported medical debt.
Some credit evaluators ignore medical debt because it often involves disputes with an insurer, hospital or physician caused by overbilling or other inaccuracies. Moreover, they say medical debt is a poor indicator of whether a person will pay other debts. To avoid problems, experts advise consumers to look over bills as they come in and contact both the insurer and provider over any dispute.
Bills from a long illness or unexpected medical emergency can create unmanageable debt. An attorney could examine a client’s situation to determine how they could best manage their debt. Chapter 13 bankruptcy or Chapter 7 bankruptcy both may help the individual consumer. Contact a Phoenix Bankruptcy Attorney today for an explanation of which which part of the Bankruptcy Code best applies to their client’s situation.
Source: FOX Business , “How Medical Debt Affects Your Credit Score“, Janna Herron, October 16, 2013