The current state of medical debt is dire: one in six Americans have medical debt collections on their credit report, and 79 million say they are having problems paying off medical bills. At FVF, we see many accident victims who are experiencing problems with medical debts incurred after an accident. When a victim is uninsured or insurance refuses to pay for a portion of those bills, it can have a drastic impact on their financial stability.
However, outstanding medical debts can also have other consequences: namely, they can harm your credit. Although most medical providers do not report bills to major credit bureaus, they may sell your debt to a collection agency. When this happens, the collection agency typically reports the outstanding bill, which means it will show up on your credit report. That, in turn, can lower your credit score, making it more difficult to be approved for loans and credit cards in the future.
Fortunately, you can protect your credit if you take action. Here’s what to know about medical debts, how they affect your credit report, and what you can do about them.
How Medical Debt Affects Your Credit
Overdue medical bills are not like other kinds of debts. While medical debt can be added to your credit report, there are certain limitations to how it can impact your score and how it is reported:
- Medical providers can sell debt to collection agencies. Medical providers sometimes engage collection agencies to purchase outstanding debts. Although providers can report debts to credit reporting bureaus themselves, it’s more typical for them to follow the collections route. These agencies can be incredibly invasive, calling several times a week. However, federal law prohibits agencies from calling more than seven times a week and between the hours of 9:00 pm and 8:00 am.
- There is a grace period of 180 days before medical bills make it to your credit report. Even if your debt is sold to an agency, the agency will wait until 180 days past the invoice date to report the bill to credit bureaus.
- After that, medical debts can appear on your credit report. Once reported, medical debts will appear on your credit report and may affect your score, depending on how it is calculated.
- New rules limit how medical debts can impact your score. Credit bureaus use a mathematical algorithm that weighs different factors like your payment history and your debt-to-income ratio to determine your credit score. In 2019, the two most popularly used models, the FICO score and the Vantage Score, were both altered to place less weight on outstanding medical debt. That means that your overdue bill may not impact your credit score as much as it once would.
- Once your debt is paid, it must be removed from your report. Accounts in collections will stay on your credit report for several years (the statute of limitations for Texas is four years). However, once your medical debt has been paid, the debt will be removed from your report. This is due to an agreement that was reached in 2017 between the three major credit bureaus and the Attorneys General for numerous states.
How to Manage Medical Debts
The good news for accident victims is that there are strategies to avoid the negative consequences of outstanding medical debt — and remedy some of the damage if a bill goes unpaid. If you are unable to afford hospital bills from your accident, here are a few of your options:
- Be proactive. The best way to protect your credit report is to act before medical debt is sent to collections. Contact your medical provider immediately after you receive your bill. If there are vague or confusing charges on your invoice, ask them to explain what you are being billed for. Medical providers will often work with you to establish a payment plan or defer payments until you can afford them. You can also contact a personal injury lawyer to help you dispute charges and work with insurance providers to cover more of the bill.
- Ask for your debt to be validated. Errors on medical bills are very common. Medical billing offices often introduce errors on invoices when they create them. The problem is further aggravated when that debt is sold to collectors. Medical debts are typically purchased and transferred en masse, which means details can easily be omitted or altered along the way. Send a written request to the collection agency asking for a detailed summary of your debt and where it came from. At this point, the collection agency must prove that your debt is valid and accurate, and must stop all activity on your account until it is able to do so.
- Contact your insurer. Insurers use many tactics to avoid paying for medical bills. Additionally, there is often more coverage available to you than representatives let on. You can and should investigate whether or not your insurer is shouldering their fair share of the bill. However, it’s best to contact a personal injury lawyer before you do so in order to understand the pros and cons of involving your health insurance in a personal injury matter.
- Negotiate with creditors. Collection agencies are just like any creditor: they want to be paid. Therefore, you may be able to negotiate with these companies to arrange a payment plan or even settle for a lower amount than the total of your bill. A personal injury lawyer can help you work with creditors for more favorable terms.
A Personal Injury Lawyer Can Help with Outstanding Medical Bills
If you are struggling to afford medical bills after an accident, it’s in your best interest to reach out to a personal injury lawyer as soon as possible. Lawyers can help you fight for compensation from insurance carriers and negligent parties. They can also work with medical providers and even creditors to help you arrange payments you can afford. And they’ll clarify your rights and options in your case.
At FVF, we offer a free case evaluation so accident victims can choose the best route for their case. Get in touch today to schedule your consultation with one of our Austin personal injury lawyers — and start taking control of your medical bills.