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Here’s How To Minimize Your Credit Damage from Medical Bills

Whether you’re facing large medical bills from COVID or other medical conditions, having unpaid bills on your credit report can seriously damage your score. The good news is, medical debt doesn’t impact your score right away, so you have time to pay on the balance before it heads to collections.

Check The Math

First thing’s first, you need to double-check the math and billing. Medical billing errors are incredibly common, and they can swing your bill by thousands or be the reason a claim is accepted or denied.

 

If you receive statements marked “this is not a bill”, be sure you proofread those as well, as they will generally list the treatments, procedures, and medications your insurer will be billed for.

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Pay as Much as You Can

In many cases, you will be able to negotiate directly with the hospital regarding your medical debt. They will often offer to help you structure a payment plan that you feel comfortable with. If you are leveraging the debt avalanche method, make sure your new payment is included in your plan.

 

In some cases, they may even have resources for financial assistance. No matter what resources you use, if you agree to a payment arrangement, be sure you stick to it as closely as possible to avoid collection actions.

Really Consider Your Payment Method

Before you start making payments, keep in mind that your medical debt will not impact your score right away. You have until the bill is 60 days late before the bills are eligible to hit collections. Debt collectors do report to the credit bureau, but not until the bill is 180 days overdue.

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With this much time before your credit score is impacted, you have room to come up with a solution. Credit cards and loans are options for when the bill is higher than you can comfortably pay with your normal paycheck. If you can, it’s best to avoid these options, as not making your loan or credit card payment on time can also have a negative impact on your credit score.

Consider Bankruptcy

In some extreme cases or situations where disability or loss of livelihood would prevent ever paying the debt, you may want to consider bankruptcy. Medical debt is what’s referred to as “dischargeable” meaning it can be resolved through bankruptcy court.

 

While this is a way to minimize medical debt, it should also be considered a last-resort option. It does prevent legal battles that could endanger your savings or home, but it will deal a significant blow to your credit that will take time to heal.

Address the Damage

Once you have the debt squared away, you’ll need to take inventory of your credit and start to rebuild the damage. To improve your credit, make sure you stay current on payments because they have the highest impact on your score. Keep your credit utilization as low as possible, and if you pay one down to zero keep it open to help your utilization rate. Remember, credit heals, and scores rise.

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