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Waiting For Insurance To Pay Medical Bills Can Make Your Credit Report Sick

Your credit report is supposed to be a predictor of how likely you are to pay back a debt, but medical debt may be making you appear, inaccurately, to be a worse credit risk than you really are.

How prevalent is the problem? One in five consumers with a credit report has a medical debt listed as unpaid, but half of those consumers show no other evidence of financial distress, and appear to be paying their bills on time, Consumer Financial Protection Bureau Director Richard Cordray said in a new study on the issue

Many consumers set aside medical bills that come in the mail, assuming that their insurance will eventually pay; or, they wait to pay until they hear that their insurance company isn’t going to pay the bill.

While you’re waiting to hear from the insurance company, your medical provider could be reporting your bill to a credit reporting agency as unpaid. Or, the medical provider might give your bill to a debt collections company, which then adds its own fees to the bill.

Complaints to the CFPB indicate that many consumers don’t know they owe medical debt until they get a call from the collections agency, or they discover it on their credit report. The median unpaid medical debt is only $207.

Despite the confusion that often surrounds health care insurance payments, some providers send an unpaid bill to a collections agency as soon as 30 days after billing, while other providers may wait up to 180 days, Cordray said. These variations mean that medical debt collection items on a credit report that appear similar can reflect very different things about your creditworthiness.

To help prevent medical debt from dragging down your credit score, follow these five tips from the Bureau:

1. Review medical bills carefully. If you have an expensive, or complex procedure, ask for an itemized bill.

2. If you pay at the time of service, get a receipt. When you dispute a bill, send copies of your documentation, not originals.

3. Check your health insurance policy, and make sure your health care provider has your correct insurance information.

4. Act quickly to resolve or dispute the medical bills that you receive.

5. Negotiate your bill. Ask for discounts or payment plans for bills you can’t afford to pay completely. Don’t put medical bills on your credit card, where you’ll incur interest.