How A Small Medical Bill Can Destroy Your Credit

May 16, 2012 by  Filed under: Credit 

Many doctors and hospitals, frustrated with slow payments from insurance companies, have resorted to the use of collection agencies. The problem has become so prevalent that I heard a story recently of a doctor that turns all of his third party billing directly over to a collection agency. He does not even wait the customary 30 to 60 days before converting his billing into a collection matter. Insurance companies are notorious for delaying payments and I truly believe this is a deliberate part of their business plan.

One small unpaid medical bill, however, can wreak havoc on your credit score. All it would take is for a medical collection to show up while you are in the midst of obtaining a mortgage and you will likely face an increase in your interest rate. Even though you have insurance and it should have paid the bill in a timely manner, you are held responsible when it is not paid. Despite a medical bill eventually being paid, it can still stay on your credit report for several years.

Your credit score affects any loan or credit application you submit. It will also affect your insurance rates in some states, approval for an apartment rental, and even play a role in an employment application.

What Can You Do?

Remember that when you receive medical services you are ultimately responsible for the bill to be paid. If your insurance company does not pay the bill in a timely manner your credit will be affected. For this reason it is a very good idea to stay in close communication with your medical provider to find out if your medical bills are being paid. I have heard many stories of individuals that wrongly take the position that it is not their problem and the matter is between the insurance company and their doctor or hospital. These individuals ignore phone calls and letters assuming that ultimately things will get worked out and their insurance company will make the appropriate payment.

Not that there is any time that you should be ‘off your guard’ but if you are planning on obtaining a mortgage or other credit, you should especially be aware of what may be happening with any pending medical bills you owe.

We have our health insurance through my wife’s employer. As a school teacher she has some very good (and very expensive) coverage. Nonetheless, we literally have had to fight battles with her insurance company over small bills that are clearly covered by the policy we have. It is unfortunate that insurance companies are operated in such an unethical and disorganized manner, but if you don’t take a very active role in managing pending medical bills your credit score may be damaged for years to come.

Please use the comments section below to share your own story of how an unpaid medical bill affected your credit score.

Helping you make the most of God’s money!

James L. Paris Editor-In-Chief ChristianMoney.com

Jim Paris is the Editor-in-Chief of Christian Money.com ( http://www.christianmoney.com ) and the head of the Internet coaching service Christian Internet Income.com ( http://www.christianinternetincome.com ).

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