Credit Score Medical Debt Personal Finance

How To Stop Medical Bills From Destroying Your Credit

Large, budget busting surprises can sneak upon the most responsible, hardest working consumer. One of the most disastrous of these is an unforeseen illness that racks up tons of medical debt.

Even with health insurance, a prolonged hospital stay or extensive treatment can leave a consumer with tens of thousands of dollars of medical debt that they have no clue how to pay.

In The Huffington Post article, Top 10 Reasons People Go Bankrupt, medical expenses was listed as the number 1 reason, claiming they account for around 62% of personal bankruptcies in the United States.

If you are concerned about medical debt wreaking havoc on your financial stability, as well as your credit, you are smart to be concerned. While none of us can guarantee we will never deal with a serious illness or medical debt, there are steps we can take to stop medical bills from destroying our credit.

First, face what you owe.

It’s emotionally draining to deal with crushing debt, but necessary. Sticking your head in the sand and vowing to worry about it later gets you in deeper trouble.

This is especially true with medical debt, because most medical providers do not report to the credit bureaus. Only when the debt is turned over to a collection agency will it end up as a negative factor on your credit report.

Remember, you are not alone in dealing with this issue. A recent CFPB study found that 19.5% of credit reports have a medical collection.

After a hospital stay or extensive illness, keep a complete folder with every medical invoice you receive, and a running balance of what you owe and all payments made. Add to this folder as you speak with your creditors, including documentation on the date you spoke, the conversation, and the person you spoke with. Staying on top of your medical bills, no matter how huge and intimidating they are, is paramount if you want to avoid big credit problems.

Second, contact the health care providers you owe.

Call each medical debtor and speak to their billing department. Explain your situation and ask for options. Some medical providers will negotiate with you on the total owed, especially if you can pay it off in a lump sum. We have seen several consumers who ended up paying around half of the total balance.

If you cannot pay a lump sum, set up a workable monthly payment plan. Be sure and have a reminder on your calendar and make certain to pay it every month. Even if these payments are small, they will still keep you from dealing with the debt as a collection account, and salvage your credit.

Once you set up a record of your debts, and negotiate with your medical care providers, you need to…

…Consistently check your credit.

It’s alarming that many people who end up with medical collections never realized they owed their medical providers! Perhaps the bill got sent to the consumer’s insurance and didn’t get covered completely, or the billing department failed to send it out at all. It’s smart, if you or a family member have suffered from a recent illness or hospitalization, to pull a credit report. (Actually, it’s smart to pull a credit report every four months anyway). If a debt you were not aware of shows up on your report, you can handle it right away. Otherwise, you will get a nasty surprise when you go to buy your next car, home, or open a new credit card.

If you have set up a plan with your medical providers and miss a payment, or more than one, your debt may be sent to a collection agency. Sometimes this even happens by mistake. It’s crucial to proactively review your credit report for any new trade lines. The sooner you catch a collection, the faster you can deal with it. Avoid collections at all costs, as they can drop your credit score 100 points or more, and take you from good credit to subpar credit.

If you find a credit item on your report that is reported erroneously, take measures to…

…Dispute any erroneous medical collections.

As a consumer, you are entitled to dispute information on your credit report. If a collection is showing in error, file a written dispute with each of the bureaus. You can find this information on each of their websites. If the bureaus cannot verify the debt, it will be removed from your credit report.

If, however, you have already had one or more medical debts go to collections, you need to address it and take measures to minimize its impact.

  • Begin by contacting the original creditor. Explain the circumstances to the first company that held the debt, and ask them to write a letter stating it should have never been sent to collections. Sometimes they will do this if you offer to pay a lump sum, which may be the entire debt or a portion of it. This is the best case scenario, because you can then dispute the collection on your credit report and have it removed, as if the collection never happened. This outcome leaves your credit unharmed.
  • Negotiate with the collection agency. If the original creditor won’t negotiate, contact the collection agency and ask them if you pay off the debt, will they ask for it to be removed from your credit report. This plan is hit or miss, often depending on your ability to pay the entire debt in full. If they agree, make sure to get it in writing that the collection should be removed from your credit report. Check your credit, as mentioned above, and if the collection still shows, dispute it.
  • Finally, just pay it. Even if neither party will negotiate, the sooner you pay the collection, the faster it will decrease in importance on your credit.

Dealing with medical debt is time consuming and frequently frustrating, especially if you have little cash to work with to pay them off. By taking the time to contact and negotiate with your creditors, and document your payments and conversations, you stand a better chance of getting out from under medical collections before they force you into bankruptcy.

How have you solved medical debt problems in the past? Got any tips for our readers? Share below!

About the author

Susan McCullah

Susan is an established writer who has created dozens articles about credit scoring, identity theft, budgeting, and finance. She has worked in the Credit Reporting industry for 10+ years, and is FCRA certified. She has conducted presentations and webinars on the topics of credit scoring formulation, raising credit scores, and credit score mistakes.


  • I got the contact of a credit repairer from a friend whom i contacted and who helped me remove all negative items from my credit and also improved my score to excellent level. i guarantee this credit repairer, he’s the best and I’m recommending him to everyone who needs to fix their credit to contact him for his service, you can contact him on creditrepairtechnologies (AT) gmail (DOT) com

  • I have dealt with this issue. My insurance has a yearly pay out of pocket maximum each year. In 2015 I paid the out of pocket maximum and continued getting bills from providers. Being it was my first time I had been to see a doctor for anything serious and my out of pocket was paid I just thought eventually everything would catch up to each self and wouldn’t have to worry about it. But insurance companies arent the same anymore. I remember when you went to the hospital give them your health ins. Card pay the deductible and not have to worry about it. Insurance companies now do not keep track of how much you have paid to the providers. Well, anyway. I got a letter from a dept collector and was seeking payment for a separate provider. And if I didn’t pay the balance they threatened to report it to the credit bureaus. I had no choice but to pay it otherwise my credit would suffer. Now I have paid over 1300.00 over my out of pocket maximum. Then a month later I got call from another collector. She told me the provider has sent me letters to an address I have since moved from. Because they never got a response from me they sold it to another collector. Now am paying on a payment plan to the collector. And on top of that they are charging interest. Which I don’t think it’s legal to do if the original loan had no interest. Now I have gather up all my receipts and fill out a grievance to the insurance company. Is it really that difficult for the insurance companies to track how much I paid for the year? I mean on the insurance website they have an area where all the claims are located. And even says if the claim has been paid. But I believe it only means the insurance company has paid. And I just got another one and I tried calling the number on the bill and get a “this number is no longer in service” so I can’t get ahold of them. And there business address is PO box number. Now I guess soon I will get another dept collector wanting their money. There has got to be a better way. It’s pretty sad the way things are going in this country. I paid my maximum out of pocket. And now I have to be their bookkeeper and use my time on something they should be keeping track of. On top of that a new job title has immersed call a medical biller. What do they do? Make sure the bill gets to the patient and that’d it’s?

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