Improve Your Credit Score By Eliminating or Consolidating Medical Debt

One kind of major financial concern that millions of Americans have to deal with these days is high medical bills that can put their good credit scores in serious danger, but taking steps to deal with it is possible. As such, doing so can be vital to maintaining healthy finances and rebuilding credit after a medical emergency.

Huge medical bills can be difficult for many consumers — even those who have their own health insurance — to deal with in their everyday lives for a number of reasons. One of the most common is that it can grow in a hurry, depending on the medical emergency a person might have faced, and it’s common for these debts to stretch into the hundreds of thousands of dollars. Another potential issue is that hospitals may be far less forgiving when it comes to dealing with late payments, and far more likely to send those debts to collections when a former patient falls behind on payments. That can be particularly troubling because of the state of the health insurance industry, which can take months or even years to resolve claims, leaving some consumers on the hook for debt for quite a while.

Why this matters
Obviously having any amount of debt fall into delinquency or default is going to be viewed negatively by lenders, regardless of the circumstances surrounding that incident. Again, many borrowers who have their medical debts sent to collections may have it happen without their even knowing about it, because they are waiting for insurance companies to resolve the matter before cutting a check, and by that point it may already be too late. Once a balance is sent to a collections agency, for whatever reason, that misstep can linger on one’s credit report for years and have a serious negative impact on a borrower’s credit standing.

For this reason, it’s usually a good idea to work with a healthcare provider, be it a doctor’s office or hospital, to fully understand one’s debt obligations following treatment. Doing so can allow them to work out payment plans with a patient that will allow them to avoid bad medical debt and keep their accounts current while an insurer deals with the claim, and eventually resolves it.

What can be done to address it?
The simple fact is that medical debt is one of the most difficult types of obligations to deal with both because of the traditional size of these balances and because of the amount of red tape a person may encounter when trying to address it. As such, having a plan in place before a medical emergency hits as a means of avoiding any potential problems might be a wise course of action.

For example, planning to consolidate medical debt whenever possible is often a smart idea because it will help patients avoid the trouble that often comes when hospitals grow impatient and sell outstanding balances to collections agencies. Again, such an action can mar your credit standing even years after the account has been paid off in full, so getting debt away from hospitals and toward traditional lenders might be a wise idea. Debt consolidation involves obtaining a loan large enough to cover an entire outstanding balance and transferring that total to a new lender, and might come with the added benefit of also giving the borrower a lower interest rate on that debt load, which in the end will make it more affordable because additional debt will not accumulate nearly as quickly. Of course, with some medical balances, it may not always be easy to find a lender that will extend credit for larger debts that are not uncommon, but looking around is always a good idea.

While debt consolidation obviously won’t reduce the amount owed, it might serve to make that amount more manageable until a check comes from the insurance company, and help a borrower to avoid any of the kind of credit missteps that typically plague medical debt in particular. Once a patient has this type of lender in place, they can begin chipping away at the balance as they would any other kind of debt in an effort to stay current and avoid late payments that can seriously drag down their credit score.

Of course, during this time it’s usually a good idea for borrowers to order copies of their credit reports in general. This will help them to better understand where they stand with lenders, and potentially identify any unfair markings which may be having a negative impact on that standing. If any such entries are discovered, it might be wise to seek out the help of a credit repair law firm, which in turn may be able to help them resolve the issues and return their rating to where it deserves to be.