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The truth about medical debt and your credit score

We recently wrote about the fact that medical debt is not always accurately reported to credit agencies. When medical debt is incorrectly reported, it can negatively impact consumer credit scores. We also mentioned that sometimes overwhelming medical bills can prompt individuals to file for bankruptcy. In fact, numerous media reports over the last few years indicate that rising medical debt is now the number one reason that consumers opt to file for personal bankruptcy in the U.S.

Improperly reported medical debt can negatively impact consumer credit scores. Bankruptcy can also temporarily impact consumer credit scores in negative ways, even though bankruptcy is sometimes a necessary solution to an overwhelming debt problem. However, these are not the only ways in which medical bills can negatively impact your credit.

Each time you allow a medical bill to go more than one month or two months past due, you put yourself at risk for having that late bill reported to credit agencies. Every single time a bill is reported as past due, this action will likely harm your credit score.

As a result, it is imperative that you not allow medical bills to go past due without a payment plan in place. When hospitals and medical professionals negotiate a payment plan with you before a bill becomes past due, your payments will not automatically be recorded as late unless you fail to pay your negotiated amount each month. If you have no ability to pay your medical bills on time, then it might benefit you to speak with an attorney who can help you navigate your debt in ways that may only temporarily impact your credit score in a negative way but will place you in a better position to achieve good credit down the line.

Source: The New York Times, "When Health Costs Harm Your Credit," Elisabeth Rosenthal, March 8, 2014

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