Does a medical bill going to collections affect your credit?
Medical debt is a common issue for many individuals, and it can have serious consequences on your financial health. One of the most pressing questions that people often ask is whether having a medical bill sent to collections will impact their credit score. The answer is yes, it can, but the extent of the impact depends on various factors.
Understanding Medical Debt and Collections
Medical debt occurs when a person is unable to pay their medical bills in full. This can happen due to a variety of reasons, such as unexpected medical emergencies, high medical costs, or insurance issues. When a medical bill remains unpaid for an extended period, the healthcare provider may turn the debt over to a collection agency. This process is known as “placing the debt in collections.”
The Impact on Credit Score
Having a medical bill sent to collections can negatively affect your credit score. Credit scoring models, such as those used by FICO and VantageScore, take into account several factors, including payment history, the amount of debt you owe, the length of your credit history, and new credit. When a medical bill goes to collections, it is reported to the three major credit bureaus—Experian, Equifax, and TransUnion—and can remain on your credit report for up to seven years.
Immediate Impact on Credit Score
The immediate impact on your credit score can vary, but it is generally not as severe as other types of delinquencies, such as credit card late payments. According to FICO, a medical collection account can cause a credit score to drop by as much as 100 points. However, this is an average figure, and the actual impact may be lower or higher depending on your overall credit profile.
Long-Term Impact on Credit Score
The long-term impact of a medical collection account on your credit score is less significant than the immediate effect. As you continue to pay your other bills on time and build a positive payment history, the negative impact of the medical collection account will diminish over time. It is important to note that paying off the collection account can help improve your credit score, but it will not remove the account from your credit report.
Strategies to Mitigate the Impact
To minimize the impact of a medical bill going to collections on your credit score, consider the following strategies:
1. Communicate with the collection agency: Reach out to the collection agency to discuss your options and negotiate a payment plan or settlement.
2. Pay the debt: If possible, pay off the debt in full to have it reported as “paid” on your credit report.
3. Monitor your credit: Regularly check your credit report to ensure that the collection account is reported accurately and to identify any other errors.
4. Build a positive payment history: Continue to pay your other bills on time and in full to improve your overall creditworthiness.
Conclusion
In conclusion, a medical bill going to collections can indeed affect your credit score. While the immediate impact may be significant, taking steps to address the debt and maintaining a positive payment history can help mitigate the long-term effects. It is crucial to be proactive in managing medical debt and to seek assistance when needed to prevent it from becoming a more significant financial burden.
