When most people consider the factors that affect their credit score, they might initially think of unpaid credit card balances, mortgage payments or even auto loans. What may not be so apparent is that unpaid medical bills have a significant influence on your credit depending on their degree of resolution.
For example, if you suddenly had an emergency and were rushed to the emergency room without insurance, what do you think would happen? Well, after you were treated by the facility you'd receive a bill indicated the amount that you owe. Now say you didn't have the money available to pay the bill and failed to communicate with the hospital. After a series of attempts to collect, the institution might assume that you were negligent and would pass on the job to a collection agency. The mere fact that it was sent to collections would cause your credit score to drop. What's really interesting, however, is that if you started off with credit in the good to excellent range, it would have a greater negative impact than if you already had a poor score. As soon as you learn of an unpaid medical bill that has been sent collections it's important to take action immediately.
Communicate Upfront and Often
The best way to avoid a hit to your score from the collections agency is to prevent it from going there in the first place. As soon as you receive a medical bill and fear you're unable to pay it off, contact the hospital's billing department. Sometimes they have patient services that allow you to create a payment plan or even grant you a cash discount based on your level of need.
Check for Billing Errors
Carefully examine all paperwork you receive from the hospital to insure that you aren't being charged for services or medication you did not receive. If you do have insurance, make sure the correct amount was applied through your insurance policy.
Periodically Check Your Credit Report
Your credit report is a clear cut indicator of what's being reported to the major credit bureaus from loan issuers, medical institutions, and other lenders. By law you are entitled to one free credit report from Equifax, TransUnion, and Experian every 12 months or annually. If you find errors on your credit report that have been resolved with the specific creditor, you have every right to dispute the claim with documented evidence. Fortunately, you have the Accuracy in Reporting Medical Debt Act on your side to counteract the damaging effects of unpaid medical bills.
The Accuracy in Reporting Medical Debt Act of 2013 "prohibits debt collectors, during a 120-day period, from reporting a medical debt to any consumer reporting agency if the consumer, within a specified time frame, disputes the validity of such debt through a written statement…"
In terms of medical bills showing up on your credit report, the law is on your side. With that being said, it's still your responsibility to stay on top of your financial reports and certify that all that appears is accurate.