Medical-Bill Myths and How They Can Affect Your Credit Score

Getting a costly medical procedure could deflate the size of your checking account and affect your credit score. Having good health insurance can help you pay for the bill, but if you fail to pay, the debt could be sent to collections, which can stay on your credit report for a number of years. If you are smart with your finances and pay attention to all of your medical bills, you hopefully won't have to worry about any of these problems. But while not paying your bill is a common reason debt gets sent to collections, there are many other misconceptions about medical bills that can hurt your credit. Here are a few medical-bill myths that can impact your credit score:

Myth: Paying any amount will stop the debt from going to collections
While paying off your bill's balance will help you avoid collections, if you are not making an effort to pay the bill at all, the debt could be sent there. Small payments or even those made past their due dates will be seen by the hospital. If this becomes a common thing, you could be in big trouble.

To help repair credit, try setting up reminders on your phone to pay your bill or negotiate with the hospital to start a payment plan, such as one with monthly or bi-weekly installments.

Myth: Notification has to occur before the bill is sent to collections
It is important to stay on top of your bills, because the debt could be sent to collections without you even knowing it. This could be because a notification was lost in the mail or has not been processed yet. Some collection agencies may take it off your report if you pay it off immediately, but others will not be so flexible.

Myth: Medical collections are treated differently than other collections
A hospital usually doesn't report the medical bills, and they won't even show up on your credit report until they are sent to collections. Once they are sent, they will be the same as any type of collection and will still have the same affect on your credit score. According to FICO, collections could cause a score to drop around 100 points, so make sure you try to avoid this situation at all costs.

Myth: Paying off the account will help repair your credit score
While paying off the loan can help you take care of the debt you have, you shouldn't expect your credit score to vastly improve in the process. If your bill is small, your score may not be hurt too much, but generally, collections could stay on your credit report for up to seven years. This could cause problems when you are looking to apply for a loan or new line of credit. Once you have paid off the account, contact the collections agency and see what you can do to get the mark off your credit report. This could help repair your score quicker than you think.