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How medical debt can affect credit

Some people in North Carolina may be among the 30% of Americans who have at least $500 in medical debt. While medical debt can affect a person's credit score, it is treated differently from other kinds of debt. Medical providers do not report debt, but once it is in the hands of a collection agency, this can change. Even if the collection agency reports the debt, credit reporting agencies wait 180 days before they in turn report it to credit bureaus. FICO, the most common credit rating model, ignores balances that are less than $100.

There are steps that people can take before the debt reaches this point to help reduce the likelihood of affecting their credit. First, people should be familiar with their insurance and what it covers. They should get itemized bills from the provider as there are often billing mixups between insurance companies and medical providers. Some providers will agree to a payment plan.

For a debt that has already gone to a collection agency, it might still be possible to negotiate. The agency might agree to not report it in exchange for immediate payment. This agreement or an agreement to have the negative information removed from the credit report should be put in writing. The Fair Debt Collection Practices Act can help protect against erroneous charges.

Medical debt is a serious problem for many people, including those who have health insurance, and if the debt is overwhelming, the solution might be bankruptcy. An attorney may be able to explain whether the person is eligible for Chapter 7 or Chapter 13 bankruptcy. The former may lead to the discharge of all medical debt while the latter may require a payment plan over several years but can allow the person to keep a home and other major assets.

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