Can Unpaid Medical Debt effect my Credit Score?
Medical debt is one of the leading causes of bankruptcy in the United States. In fact, before recent legislation was passed, over half of all bankruptcy filings cited medical debt as the reason for seeking the court’s protection. Nonetheless, a large number of people think that they don’t have to treat medical debt the same way that they treat other debts.
Part of the reason for this is that unlike other creditors, hospitals have to provide care to anyone who walks through their doors in dire need of medical attention. This does not mean that they have to provide the treatment for free, but they cannot deny a person care because they cannot pay. Unfortunately, this means that a lot of people assume that if they cannot pay at the time of treatment, they don’t have to pay.
How Your Credit Score Can be Affected
To combat this misperception, many hospitals have started to use collection agencies to collect the debts that they are owed. Because of this, many patients are now reporting that they are seeing their credit scores drop because of unpaid medical debt.
The problem for many patients is that hospitals are not equipped to work out payment plans. This leaves many people with thousands of dollars in bills and no way to pay for it. Since the hospital’s solution is to turn the account over to a debt collector (who pays them a portion of the bill), it’s up to the patient to work out the details of how they are going to pay before it effects their credit score.
What Can You Do?
Fortunately, there are things that a person in this situation can do. After trying to negotiate with the hospital, many people choose to put the remaining balance on a credit card or personal loan. While this avoids the problem of it effecting a patient’s credit score, it creates a new problem of having to pay off high interest debt.
A better option for many people is to try debt consolidation. By combining the hospital bills together into one loan with a low interest rate, the monthly payments tend to be a lot more affordable than trying to pay everything all at once. Since most consolidation loans have lower interest rates than a credit card, it can also save a patient a lot of money over the life of the loan.