How to Get Medical Debt Off Your Credit Report

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If you’re lucky enough to have health insurance and a perfect credit score, then you may not be worried about medical bills. But a single unpaid medical bill can slash your free credit score by 100 points, potentially costing thousands of dollars in higher interest rates.

Mark Rukavina, principal at Community Health Advisors and former executive director of the Access Project, points out that unlike general credit card debt or student loans, medical bills are “generally incurred after an illness or injury so it’s not something that can be easily planned for.” A routine surgical procedure can result in bills totaling thousands of dollars, while more intensive treatments can cost five or six figures.

Further complicating the issue is the fact that “sometimes it’s a little unclear how the cost of that care is going to be covered, whether insurance is covering the bill or if the patient is covering it,” says Rukavina, adding that roughly half of bills in collection are medical-related.

[Learn More: What is a Good Credit Score]

Don’t ignore bills

If you’re unsure about whether to pay that $89 bill or if insurance will cover it, talk to your provider. “Don’t ignore bills and don’t expect them to go away,” says Rukavina. “It’s far less likely it will be sent to collections if you’re communicating with the provider. The earlier, the better.” If you work out an extended payment plan with your provider, get it in writing and make payments on time, he adds.

Consumers who become sick or injured and can’t pay their medical bills may find themselves facing multiple layers of insult and injury. Bad becomes worse when collection agencies hound by phone and mail and delinquent accounts stage an evil takeover of the consumer’s credit report card.

In fact, most reported collection accounts – 52% – are medical. Fortunately, changes by the big three credit bureaus (Experian, Equifax and TransUnion) that went into effect this past spring make it easier for consumers to get medical debt and other types of inaccurate data off their credit reports.

The changes are part of a broad policy overhaul involving the credit reporting industry and are the result of a settlement between the state of New York and the three credit reporting bureaus. New York State Attorney Eric Schneiderman began an investigation into the three bureaus’ reporting policies in 2012 after several New York residents filed complaints stating that they were unable to correct errors on their credit reports. Although the lawsuit was filed on behalf of New York residents, the resulting settlement created new policies that affect consumers nationwide.

Medical debt and your credit report

As part of these changes, medical debt can no longer appear on your credit report until after 180 days. This delay provides additional time for payments from insurance companies to post to an account and allows a longer period of time for the consumer to correct discrepancies and catch up with unpaid bills. The extended period also gives consumers additional time to arrange payments on the remaining balance.

As a result of the policy changes, consumers should find the process to get paid debt taken off their credit reports. The error disputing process was also made more consumer-friendly.

Despite the process becoming easier, some aspects of credit reporting do remain the same. Accurate delinquent medical debt is usually removed from a credit report seven years after it became delinquent.

For consumers who discover errors or paid medical accounts on their credit reports, here are the steps to take to remove medical bills from credit report:

[Learn More: Improve Your Credit Score]

1. Document the error

If you have paid off a medical debt but it is still reported as unpaid, make copies of receipts, cancelled checks or other documents that prove the account was paid off. If necessary, request a current account statement from the payee (the medical office or the collection agency).

2. Contact the credit bureaus

First, contact the credit bureaus as soon as you become aware that there is an error, or when you discover that a paid-off medical account still shows as unpaid on your credit report. There are two ways to do this. You can simply fill out the dispute form on each bureau’s website to inform them that the account has been paid off. You can also file a dispute by sending a formal letter and copies of your supporting documentation through certified mail. Either way, the bureau is then required to investigate and has 30 days to correct the issue or respond to your dispute.

3. Follow up

Once you have disputed the error and the bureau responds, or you pay off the medical debt, check your credit report again to ensure that the corrections have been made.

If everything that shows up on your credit report is correct but you still have lingering medical debt, take heart. Even though medical debt does impact your credit score, the Fair Isaac Corporation (FICO), the company that helps determine how credit scores are calculated, looks at medical debt differently than other types of debt. This means that even though the medical debt may appear on your credit report, it won’t affect your overall FICO score quite as much as it may have in the past.

Current and prior versions of the FICO credit scores treat collections the same way whether medical, non-medical, paid or unpaid. Collections are considered to be major derogatory items and can, but don’t always, cause lower credit scores. In FICO’s latest, and yet to be released, credit score generation called FICO Score 9, medical collections, including paid medical collections, will have a smaller impact than non-medical collections, according to Anthony Sprauve, FICO’s Senior Consumer Credit Specialist.

The newest version of the VantageScore credit score (Version 3.0) ignores any and all collections that have a zero balance. The VantageScore credit scores do consider all collection types that are unpaid. What this means is if you have a medical collection and you end up settling it, or paying it, then once it’s updated to show a zero balance the newest VantageScore will completely ignore it.

If your medical debt isn’t in delinquency yet, there are several options that will effectively eliminate what you owe while keeping your credit intact:

[Learn More: Credit Score Range]

Negotiate

Your bill might give you an itemized breakdown of every accrued expense. But just because it says that you owe $275 for a lab report, say, that doesn’t mean you have to pay that amount. That’s because many healthcare facilities and providers are amenable to negotiating your bill and usually, all you have to do is ask if they’ll give you a better rate. Chances are, they may. (See “Ask for balance forgiveness” below.)

Review the charges

When you have health insurance, your insurer negotiates cheaper prices for its customers. If you have a high-deductible coverage (and thus, have to pay out-of-pocket until you reach your deductible), you mistakenly could be charged the higher, uninsured rate. Take the time and call your healthcare provider to verify you were charged the right amount. If not, a lower “amount due” awaits you.

Establish a payment plan

Health bills can easily reach into the four or five digits. If yours are more than you can handle to pay off in one fell swoop, inquire with the billing department to see if your hospital or doctor will accept smaller payments on a monthly basis until you eliminate the balance. If you agree on an installment schedule, be sure to pay in a timely fashion; otherwise, they might terminate the agreement if you have lapses in payment.

Make a lump sum payment

If you’ve been making consistent payments towards your debt, it’s possible that a doctor or facility will accept a one-time payment that’s smaller than your outstanding balance in lieu of continuing your monthly payments. To increase your chances of success, offer a fair, lump-sum amount and pay by check, so the facility avoids any credit card transaction fees.

Real Story: Tactics I used to successfully fight my medical debt

When I brought my husband home from the hospital a few years ago after having a surgery, we were both happy. He had been having a difficult time breathing, smelling, and even tasting things for the past few years. It turned out he had a case of rogue nasal polyps gone wild, and the only cure was to have them surgically removed. The surgery was 100% successful, and soon he was back to his regular old self (as normal as that is, at least).

Our happiness was short-lived though; within a month, we got two bills in the mail – one from the hospital, for $1,700, and another from the surgeon who performed the operation, for $12,000. We were surprised. We double checked coverage with our insurer before the operation. They assured us that they would cover their portion of the bill. We naively assumed that this meant the operation would be covered in full, but that was not the case.

After several hours of internet sleuthing, I found out we had several options available to us. All hope was not lost. We wouldn’t necessarily be chained to these bills for the rest of our lives. We looked at our options, and one by one we employed strategies to reduce the bill.

[Learn More: Highest Credit Score Possible]

Medical debt payment plan

The first order of business was letting the hospital and the surgeon know that we were willing to play ball. We could have just ignored the bill and pretended it didn’t exist, but we knew that doing so would come back to haunt us later in the form of derogatory marks on our credit reports.

We set up a payment plan with the hospital and the surgeon for $100 each per month.

Luckily, we were able to set up interest-free payment plans.

Tip: Many hospitals offer this nice feature – they know medical bills are a burden, and as long as you’re making a consistent effort to pay, they’re happy.

After 17 months, we completely paid off the hospital bill. At the rate we were paying the surgeon’s bill, though, we’d be looking at another ten years of payments! We needed another solution for this debt, and so we moved onto our next option.

Insurance appeal to reduce the cost

Our next course of action was to appeal to our insurer to cover the full amount of the surgeon’s bill. It turns out (unbeknownst to us) that the surgeon was an out-of-network provider. Our insurance still paid him, but only at the rate that an in-network provider would charge.

The surgeon’s office worked with us to craft the appeal. They told us they did so all the time because we lived in a remote area and there were no in-network surgeons who could do this type of surgery within 350 miles.

We sent in the appeal, spoke by phone with the appeals board, and waited several months. Our appeal was rejected. We were still on the hook for $12,000.

We had one final option.

Ask for balance forgiveness

Our last option was to write a letter to the surgeon himself asking him to forgive the balance on the loan. We figured we had at least a decent chance of success for several reasons. One, he had already received the amount covered by our insurance policy, so at this point he was charging us for fees above and beyond that figure. Two, we had demonstrated that weren’t slackers or deadbeats. We had already set up a payment plan and made steady payments.

My husband wrote him a short, no-frills letter. He told the surgeon that we appreciated his work, but we could not afford the bill. My husband was scheduled to return to school soon, and our ability to pay would inevitably go down below the meager amount we were paying each month. (By the way – I’m happy to report that this prediction proved true. Two years later, we still cannot afford another loan payment).

The letter stung our pride, but it was our last chance to find a way out of this debt. We crossed our fingers and hoped for the best.

Two months passed by, and we noticed that the monthly payment for the surgeon’s bill hadn’t been pulled out of our bank account. When we contacted the office to find out what happened, we were told that the debt had been forgiven. It was finally over! We were completely relieved. We could finally get on with our lives and start tackling other problems.

Lessons learned

The most important thing this whole experience taught us was that there are always options, especially where expensive medical bills are concerned. Medical expenses don’t have to be a financial death sentence. As long as you are open to researching new options and stepping outside of your comfort zone, it is possible to afford the medical care you need.

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Published September 14, 2015 Updated: September 21, 2016
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