Medical Debt Settlement: How It Affects Your Credit Score & How to Deal With It Effectively?

What is a Medical Debt?

As compared to other debts, medical debt can really be a key reason for emotional stress. The main reason behind this stress is that it never accumulates by choice. Most of the times, a medical debt is accrued by an unexpected illness or accident. The nature of this debt is that it adds on quickly and unexpectedly. Serious health issues can really raise your expenditure and can put you in debt.

How Does Medical Debt Collection Work

Whether you have across any sudden medical illness or you have just stayed at the hospital for sometime, you will be left with the medical bills beyond your reach. In this scenario, even having health insurance will not prove handy. This medical debt need to be paid soon or else you will have to face medical debt collections.

How Deal With Debt Collectors?

How Deal With Unpaid Medical Bills Debt?

It’s not that you just have to deal with the hospitals and the doctors your health insurance company and debt collectors also comes into the picture. Be informed, some hospitals or debt collecting agencies will have an unforgiven nature and will do everything to collect the debt. If you owe them money, they can sue you and make you understand that you are no more eligible to have medical treatment at their establishment.

As and when you receive your medical bills, first thing you have to do is to cross-check its accuracy. Give your bills a detailed look and look for the errors and if there are then make sure you haven’t wasted any time in contacting the billing office so that the errors can be fixed as soon as possible.

If you are stuck in the medical debt, it is obvious that you want to get debt relief soon as possible. You must be having so many questions in your mind, but there are steps that will prove helpful in making the whole medical debt less overwhelming. It is important to calm yourself and take a deep breath. When you are not perplexed, you will be in a better position to deal with the debt.

Medical Debt Settlement

Follow the below-discussed steps –

Figure Out a Deal –

If you are not in a position to pay off your medical debt, you need to sit across with the hospital administrator and explain him the whole situation. You can give details of your income and what is the amount you can pay. Don’t forget to share that you are grateful for the service they have offered. Then ask the burning question that whether they can settle for a lower amount or whether a payment schedule can be worked out.

Inspect Your Billing –

The moment you receive your bill, leave all the things aside and have a detailed look at it. Check the bill for any overcharges or error. Make sure you are not double-billed for your treatment. What you can do is to prepare a list of all such questionable things so that you can discuss them with the hospital authorities. And if you didn’t get anything on the bill, then also you can call the billing office to explain it to you.

Get familiar with the insurance policy –

Do you know you have a chance to reimburse for medical expenses also? Are you wondering how? There may be a chance that your insurance provider and the hospital have overlooked missed charges covered by your policy. Make sure you have compared the insurer ‘explanation of benefits’ things with the codes on your hospital invoice in order to see if any charges you are not accountable for.

Make a timely appeal.

If you find any charge that your healthcare provider should pay, make sure you have called the hospital and the insurance provider so that necessary adjustments can be made to the bill. It is important you have made a timely appeal.

It is important that you have kept your cool throughout the appeal process. When you ask the hospital authorities about the bill, you will surely see a delay from the insurance company. Ensure that you are prepared for the word denial and prepare yourself to fight it.

So, there you have it, if you are facing medical debt then the above-discussed information will surely come handy.

How long does it take for medical bills to be removed from credit report?

The length of time that medical debt stays on your credit report could be seven years, or could be ten years, or a combination of the two. And as long as the unpaid doctor, hospital, or dental bills last on your report, it could affect your credit rating negatively.

What can I do if I don’t have HealthCare Coverage?

Not everyone has the health care coverage, so if you don’t have it and you know your physician well, make sure you have dealt with him directly. So, if the physician agrees to receive cash payment, then sit across with him and work out a plan.

Let us assume, you are dealing with a hospital, make sure you have holistic understanding of the charges. Yes, it won’t be easy to deal with the medical bills and auditing is the only through which you can get the errors rectified and save yourself from any type of fraud.

What can I do if I have HealthCare Coverage?

Now, if you have the health insurance and you want the charges to be covered, make sure you have read the policy or you can the help of your insurance agent. If you are confident enough that you deserve an reimbursement or it is the task of your healthcare provider to make the payment to the doctor, make sure you have filed a timely appeal.

Don’t expect it to be a smooth road, as there will be denials and delays and most importantly you have to keep the records of all your correspondence. The main reason behind this is that in case you have to file a complaint then you have apt data and records. Be informed, you may still have to make the payment for your bills.

How Can Medical Debt Collections affect Credit Score?

Yes, having mountain of medical debt can be overwhelming, but what’s worse is that it even hits your credit score. The debt collector is being informed by the doctors about the unpaid debts. Further, the collection agency does all the reporting. As per CFPB (Consumer Financial Protection Bureau), half of all the collection accounts on the credit reports are because of the medical debt. Accounts like these can also damage your credit scores. Even a single collection account can make the credit score to drop a maximum of 100 points and even more.

Majority of the people/patients are not aware of how their medical bills can have negative influence on their credit score. They are not aware of the fact that –

  • Despite of the fact that you are making payments to your medical bills, they still can be sent to the collections.
  • Paying will fix your credit score. When we talk about these accounts, they are usually reported for 7.5 years and unfortunately most of the times they have a damaging nature.
  • The status of the debt is far more important than size of the debt. In other words, it can be said that even a small bill that land up with the bill collector can prove hazardous to your credit scores.
  • There has been various instances where the patient has not even received his bill, but the bill has landed up in the collections. But, by the time you decide to do something about it, the damage has already been done to your credit score.

Many people are not aware of the fact that there are various credit scores and not just a single one. As per the new version i.e. FICO 9, paid collection accounts are ignored and medical collection accounts have less weight under this model.

But, still the older version of the credit score is being used by majority of the lenders and for these lenders don’t give special attention to the medical collections. For that reason, if there is a collection account on your credit report, most probably it will be viewed as negative when you apply for the new credit report, employment, or insurance.

What can be done to maintain a healthy credit score?

Before these medical bills land up in the collections, make sure you are proactive about your medical bills. Even if you have good health insurance, it is important to review your explanation of benefits (EOBs). In case, it is not been taken care of then you should immediately call your insurance company or the provider.

If a collection agency contact you regarding the medical bill, make sure you have asked them not to report it if you will make the payment right away. These agencies are not that bad at all and won’t report it if you make the payment for the payment. If somehow your collection account has updated as paid, it won’t do any good for your scores, unless the lender is using new version of credit score. So, if you can then make sure you have removed this item. Remember, not every agency will be interested in working with you.

If you haven’t received the cop of the bill, you can do two things. Firstly, you can file a complaint with Consumer Financial Protection Bureau. Secondly, is to get in touch with the original provider and get them to pull it back from collections, so that you get to pay them directly. If they do, usually the account won’t get reported.

If you are being contacted by the collection agency and you don’t believe that you owe the bill, you can ask the collection agency to validate the debt under Fair Debt Collection Practices Act.

Medical Debt Settlement Letter Sample

Consumer’s Name
Consumer’s Address
City, State, Zip Code


Recipient’s Name
Recipient’s Address
City, State, Zip Code

Dear Name of Recipient,

The purpose of this letter is to formally request a settlement for the medical bills I owe your hospital. I regret that I am unable to pay the bill in full at this time because my monthly income has been greatly reduced after the automobile accident in which I broke both of my legs.

I am requesting a payment plan of $100 per month until the time that I am able to continue working and receiving my usual salary. The rehabilitation may take from six to nine months. At this time, my income is $$$$ and I have a home mortgage of $$$$ to pay. I will pay by check on the 15th of each month beginning DATE.

If this is agreeable to you, kindly send me a letter stating the repayment details as I have described. I can be reached at 555-123-4567 or a [email protected], and I would be happy to talk to you and give you more details at any time.

Signature of Consumer
Printed Name of Consumer
List of Enclosures