Unpaid debts, such as mortgages, auto loans, student loans, and credit card debt, are different from medical debt because circumstances are almost always beyond your control. As a general rule, people don’t choose medical debt, but it can still take you by surprise and cause financial burden.
Keep reading to learn how to create a plan to reduce debt and maintain your credit score.
What if you can’t pay your medical debt?
Unpaid medical bills do not affect your credit report or credit score unless they are seriously past due and sent to collection.
Like other debts – your mortgage, car loan, or student loan – if medical bills are paid on time, they don’t affect your credit score or your credit report.
“Unpaid medical debt will not be included on your credit report unless it is 180 days or more past due,” says Rod Griffin, senior director of education and consumer information at Experian.
Unpaid and past due medical debt that ends up on your credit report stays there for seven years. To avoid this, keep the following in mind:
- Be responsible. If you’re already past due on your medical bills and they’ve been sent to collections, don’t ignore it – having a collections bill can negatively impact your credit score.
- Verify your medical debt. Make sure the amount they say you owe is accurate. Request an itemized invoice and confirm expenses.
- It is wise to ask your healthcare provider or collection agency if they will negotiate with you.. “Their goal is to get the money back, so they may accept a lump sum or repayment plan, and sometimes they will agree to let you pay back less than what you owe,” says Griffin.
- Contact a Nonprofit Credit Counseling Service. A certified loan counselor can work with you to create a debt repayment plan that fits your budget.
Medical Debt Repayment Strategies
Being active can be the first step towards maintaining your credit.
Try to negotiate
If you have medical bills that are going to be difficult to pay, Griffin says your first goal should be to keep your debt from paying off while you work to understand your costs, Griffin says. You should negotiate with your health care provider and figure out the best way to pay off your debt. “Most hospitals and health care providers would rather work with you to help you find a payment method than send a bill to a collector,” he says.
Explore assistance programs
It may be worth the time, effort, and research to look into programs that help cover medical expenses. “Some hospitals and health care providers provide housing for low-income, high-debt patients so you can see if you qualify for an income-based hardship program,” says Griffin. Similarly, you can check with your health care provider if they have a financial aid policy or a philanthropic aid program.
Consider a payment plan
Once you find it difficult to pay off your debts, contact your healthcare provider and request a payment plan before it is passed on to a collection agency. “You may be able to work out a payment plan directly with your healthcare provider, perhaps even with a low or no interest rate. Just be sure to get the repayment agreement in writing,” Griffin continues.
Check if your medical bills are correct
A good approach is to request an itemized invoice and make sure there are no unreasonable or duplicate payments.
“Not everyone has the time or energy to argue and decipher detailed bills,” says Jonathan Howard, Certified Financial Planner and Financial Advisor at SeaCure Advisors.
In these cases, consumers may consider hiring a medical billing attorney.
“These services are not free, but their cost can be justified compared to the cost of making an erroneous payment,” he says. To find one, contact an agency such as Claims Assistance Professionals and Advocates.
Should You Use a Credit Card to Pay Your Medical Debt?
Since medical debt is currently capped at an interest rate of 8 ¾ percent, according to the Federal Department of Health and Human Services, using a credit card to cover medical debt is unwise.
“Credit cards can charge interest rates around or above 20 percent and often include annual fees,” says Howard. “Medical debt also has consumer protection that you won’t find with credit cards.”
And once you use a credit card to pay off your medical bills, you may lose your medical bill protection.
“Once you owe your credit card provider, it’s impossible to tell if it was due to a hospital, vacation, or trip to the mall,” says Sean Fox, President and CEO of Freedom Debt Relief.
If you’ve exhausted all other options to pay off your medical debt and must use a credit card, consider using a card that offers 0 percent APR for a long introductory period and rewards that can help offset the cost of your medical bills.
Should You Consider a Medical Credit Card?
Medical credit cards are funded in the form of a credit card for medical services. These cards can be used for personal expenses, treatments and procedures not covered by your insurance. They are usually offered at your service provider’s office.
Medical credit cards usually offer deferred interest plans, which means you don’t pay interest on qualifying purchases during a certain grace period. But the debt is not interest-free – it is deferred for a certain period. If you do not repay the balance by the due date, you will be liable to accrue interest starting from the original opening date of your account.
bottom line
Unlike some other types of debt, you don’t get to choose whether you get sick or need medical care.
On the other hand, unpaid medical debt is not added to your credit report unless it is overdue by 180 days or more.
If you have medical debt that you cannot pay on time, contact your healthcare provider to see if you can work out a payment plan or negotiate the balance. As with any debt, it’s important to have a plan to pay it off.
“Look at your monthly expenses to determine how much you can contribute to your medical debt each month,” Griffin recommends. “Setting up reminders or auto payments can be a useful way to ensure payments are made on time.”
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