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4 Myths of Unpaid Medical Bills

Understanding Unpaid Medical Bills

A couple review unpaid medical bills at a table

According to a 2012 article by Gerri Detweiler, “If you want to keep your credit rating strong, you might want to stay away from a hospital or other medical facility.” In 2010, collection agencies contacted some 30 million Americans about unpaid medical bills. Additionally, earlier research conducted by the Federal Reserve suggested that over 50% of all outstanding balances on credit reports were related to unpaid medical bills.

Provided unpaid medical bills impact millions of Americans, it’s important to be aware of how such outstanding debt can impact your credit. Detweiler’s 2012 article also outlines four costly medical bill myths. Here are the takeaways below:

Myth 1: As long as I am making payments on a medical bill, it can’t be sent to collections.

While this can be the case, factors such as the size of your payments as well as payment tardiness can play a role. If your regular payment is merely a tiny percent of your overall debt or your payment arrives a day late, a provider can pass on a bill to collections.

Myth 2: I have to be notified before a medical bill is turned over for collections.

It’s not uncommon for a debtor to first learn that their unpaid medical bill has been turned over to collections by a call or letter from the collection agency itself. By this time, the damage may already be done.

Myth 3: Medical collection accounts are treated differently than other types of collection accounts when credit scores are calculated.

This is usually not differentiated. While intuitively it makes sense to apply some level of leniency for people enduring a medical crisis over debtors who were simply reckless spenders, distinguishing between medical and nonmedical collection accounts when calculating credit scores is not common practice.

Myth 4: To clean up my credit, I need to pay off medical collection accounts.

Collection accounts harm your credit scores and that’s generally true despite their payment status. While some models may favor collection accounts that have been paid, it’s no guarantee.

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