Credit Report

One-third of US citizens struggle to pay their medical bills, the leading reason behind filing for personal bankruptcy. When an individual is unable to pay the medical bill, it negatively impacts the credit score and his financial abilities in the long run. However, the three major credit reporting agencies – Equifax, Experian and TransUnion agreed not to add delinquent medical bills into the credit report until they are outstanding for 180 days.

Recent Changes for Medical Debt Reporting

The new practice, announced in March, 2015 will be applicable across the country. The team at credit bureaus will review the complaints and investigate the matter even after the creditor claims the information to be accurate. Also, the bureau will wait for 180 days before adding medical debt into the report. The borrower will have enough time to receive and pay the bill and get the medical debt removed from the report as soon as the insurance company pays for it.

Need for the New Credit Reporting Rule

A lender goes through the credit report of an individual to decide whether he will be able to pay the bills on time or not. But, a delay in payment of medical bill by the insurance company or late reimbursement of medical bill can become the reasons for errors in the credit report. According to the Federal Trade Commission, one in five consumers receives at least one credit report with some mistake. This mistake can be difficult to fix. The individual is required to file a dispute with the credit bureau and go through a time consuming process to get the error rectified.

Don’t Let Medical Bills Ruin your Credit Score

A report by the Consumer Financial Protection Bureau revealed that medical debts make up more than half of the collection items on most credit reports. While the credit reporting agencies are on the borrower’s side, it is important that every individual should prevent medical bills from hurting their credit score.

Don’t assume that the hospital or doctor will get paid because the bill has been sent to the insurance company. If the bill remains unpaid for a month or more, it is advised to call the medical provider and insurer to find out the reason causing a delay in processing. Continuous follow up is vital.

Inability to pay the total amount at once doesn’t mean defaulting the payment. Try to work out a payment plan with the medical provider because they don’t usually charge an interest.

An individual’s credit rating might be tarnished by medical bills he doesn’t own or if a dispute delays the payment. The new practice is definitely good news for borrowers but a pro-active approach in terms of cleaning up credit reports.