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Medical Debt and Its Effects on Credit

Personal Injury Lawyer

Even if you have health insurance, the cost of medical care for a serious injury can be devastating. Though it seems unfair, expenses from an injury due to an accident that was not your fault can hurt your credit score. The good news is that credit agencies are starting to change the way they handle medical debt so that it has less of an impact. Unfortunately, however, it can still hurt your score.

Credit Bureaus’ Concessions

Within the last three years, credit reporting agencies finally recognized what should have been obvious: Unlike other types of consumer debt, medical debt arises from circumstances that are beyond your control. Therefore, it shouldn’t impact your credit score the same way that other types of unpaid debt does.

Having realized what hundreds of injured consumers have known for decades, the credit bureaus have put new rules in place to protect your credit score from unpaid medical bills. Medical debt no longer remains on your credit report for the standard seven years once it is paid by insurance or with a settlement. Furthermore, there is a longer grace period before credit bureaus can list medical debt on your report.

Collection Agencies

Doctors and hospitals usually do not report your unpaid medical bills to credit bureaus themselves. Rather, they may transfer the debt to a collection agency. That is when the bills show up on your credit report and start affecting your score.

It may be possible to prevent your provider from transferring your bills to a collection agency. If you communicate with the doctor or hospital early and often regarding your situation, you may be able to work out an arrangement that prevents the provider from sending your bills to collections. You may be able to make smaller installment payments or defer payment until you reach a settlement with the insurance company of the party responsible for the accident. If your bills are already in the hands of a collection agency, it still may be possible to work out an arrangement that would minimize the damage done to your credit by unpaid medical bills.

Know that you are not alone with your burden. Forty-three million Americans had credit files including unpaid medical bills in 2014, and medical expenses accounted for 52% of all debt on credit reports. One of our attorneys may be able to help you reason with providers and collection agencies, if necessary, to protect your credit score and avoid other financial detriments, such as bankruptcy. Contact an attorney like a personal injury lawyer, at the law offices of Davis & Brusca, LLC, for more information.