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How can medical debt impact your credit scores?

A serious injury, illness or hospital stay can put you in serious debt, with health insurance. If it goes unpaid and is turned over to a collection agency by your health care provider, it's likely to end up on your credit report and seriously impact your credit scores.

The good news for those with medical debt is that there have been changes made to the FICO credit scoring system recently. Under the new system, called FICO 9, medical bills that have gone to collection aren't as large a part of a person's overall credit score as they used to be. Under FICO 9, once a collection account has been paid, it's no longer counted.

However, most lenders haven't yet converted to the new system. They're still using the FICO 8 scoring system, which treats collection accounts the same, whether they've been paid or not. Even if you eventually pay your medical debt in full, once an unpaid bill hits your credit report, it can take as long as seven years to drop off of it.

Of course, it's essential to keep track of your medical bills to ensure you're not being charged incorrectly and that your insurance company is covering everything it's supposed to. This may be the last thing you feel like doing if you're recovering from an illness or injury. However, it's crucial that you, or a trusted family member or friend, do it and that you take action immediately if you find a problem.

If the unpaid medical debt that's gone to collections is valid, there's really no way to get it removed from your credit reports, even if it's been paid, if the lender isn't using the new FICO system. The best thing you can do is keep your other debt, including credit card balances, to a minimum and pay your bills on time so that your credit scores aren't further negatively impacted.

If your medical debt has become overwhelming and is impacting your other finances, it's important to find out what your options are. You may be able to negotiate a lower amount with your health care provider. Often, they'd rather get something than risk having a person declare bankruptcy, in which case, they may get little or nothing.

If you still aren't able to get out from under your medical and other debt, an experienced Arizona bankruptcy attorney can provide guidance and support.

Source: NerdWallet, "Medical Bills on Your Credit Report," Lindsay Konsko, accessed Oct. 07, 2016

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