If you're struggling to get your credit on track, one of the things you may be frustrated with is the fact that medical bills can impact your credit so much. One missed bill can cause your credit score to drop significantly if it goes to collections.
What can you do if that happens? Most people assume paying the debt is the only option, and so they struggle or determine bankruptcy is the best choice. Fortunately, changes in law have made that less necessary.
Recently, it was determined that the three credit reporting agencies will need to wait 180 days before they can place a medical debt on your credit report. Unpaid bills that you later pay for also must be removed instead of continuing to impact your credit score.
This is a major change. In the past, even if you'd paid for a medical bill, it could stay on your record for years. Until it dropped off, others would see you had a debt go to collections. Even though you'd paid it off, you'd still be judged by your credit score.
Prior to this change, there was no grace period for medical debt. That meant that if you missed a payment, it could immediately be sent to the credit reporting agencies and affect your credit rating. This didn't work well for patients in the past, especially because the medical office might send the bill after 30 days while insurance could take 90 to process the claim. That would then result in an unfair change to a patient's credit score.
The changes made now are not retroactive, but they could help you if you're facing new debt. Keep this in mind, so you can monitor your credit score moving forward.
Source: Time, "A New Rule Just Made It Harder for Medical Bills to Mess up Your Credit," Elizabeth O'Brien, Sep. 15, 2017