How Sick Is Your Credit Report?

A few years back, my wife suffered a serious illness that resulted in more than $100,000 in medical bills. Thankfully, we had very good health insurance and the bulk of the expense was covered for us. However, the need to sift through all of those medical bills to determine if they were accurate and how much we would need to pay was arduous and confusing. Before long, our heads were spinning from the effort.

Apparently, we were not alone. According to a report just released by the Consumer Financial Protection Bureau (CFPB), 43 million Americans have past due medical debt listed in their credit reports. In fact, nearly 20% of consumers have a credit report that shows they are in collections due to medical debt. You can bet that many of them don’t even know the debt is there, finding out only when they are turned down for credit or even worse, a job offer. The problem is staggering when you think about the people affected and the amount of money involved. Consumers are being charged late fees and interest on the bills in collections. The hit to their credit scores means they are potentially being charged higher interest rates on loans.
There are many surprising facts in the CFPB’s report.

• 15 million American’s have nothing negative but medical debt collections on their credit reports. The bulk of these consumers have otherwise healthy credit reports. They pay their bills on time and have plenty of available credit.
• Past due medical debt is relatively small compared to other debt in collections. On average, past due medical debt amounts to only $579 per line item. Past due non-medical debt averages $1,000 per line item.
• At 52%, over half of overdue debt reported on credit reports is from medical debt. Medical debt collectors are very aggressive, sometimes reporting the debt as past due in as little as 30 days.

How can you have medical debt collections on your credit report without even knowing it? There are two probable answers.

• You don’t check your credit report often enough, or perhaps not at all. Checking your credit report regularly can eliminate the problem entirely by making you aware of all of your debts. You can receive one free credit report from each of the big three reporting agencies every year through www.annualcreditreport.com. If you are really diligent, you can receive a report from one agency at a time and space the reports out so that you receive one every four months.
• Many medical debt collectors use a tactic called “parking”. Parking consists of reporting your debt is in collections as a means of getting you to pay. You may not even be notified or be given the chance to pay before the debt hits your credit report. Parking may even occur before your insurer has had time to process the claim.

What can you do to prevent medical debt from becoming a problem on your credit report?

• Get an itemized bill for every medical service that is provided. You should review each item on your medical bills to ensure that there are no errors and that you actually received the service that is being billed.
• When you find errors, challenge them quickly.
• Respond in writing when disputing a bill. Be sure to include copies of any relevant documents such as doctor’s records, checks, or credit card statements.
• Keep in contact with your medical insurance provider. Have a clear understanding of which bills have been processed, what amount will be covered by insurance, and what amount you will need to pay on each bill.

The key to success in handling your medical debt before it becomes a problem on your credit report, is to be aggressive and organized. Don’t ignore the bills as they come in or blindly pay them without taking the time to thoroughly review each line item. My experience showed that there were plenty of errors that could have cost my family and our insurers thousands more if we had not been diligent.If you don’t tackle your medical debt head on, you could damage your credit score or have the debt fall into collections. All of which will cost you more in the long run.