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Keep An Eye On Medical Debt

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In the past few years, a number of studies have found that debt incurred by consumers stemming from medical treatment has been quite problematic.

Medical debt is forcing many consumers into bankruptcy, and often, even those who aren’t forced to go that far can often fall very far behind on their bills because of the sheer size of their outstanding balances. As with any time a consumer falls behind on paying into debt, missing deadlines will have a negative impact on their credit rating, but in the case of medical debt, the problems can also be more severe than that as well.

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That’s because even relatively small medical bills these days are being sent to collections agencies, which can have a severe negative impact on a consumer’s credit score without their even realizing it, according to a report from the Associated Press. A recent study estimated that about 30 million Americans were contacted by collections firms for unpaid medical bills in 2010, up from 22 million in 2005.

This is a problem because, when you have a bill sent to collections, that action will remain on your credit report for as much as seven years, regardless of whether you later paid off that debt. That can have a significant, long-term impact on your credit standing, lowering your score by as much as 100 points in some cases, and not only preventing you from having access to some lines of credit you may want, but also increasing the interest rates on the accounts you do qualify for.

Similar debts may be sent to collections for other types of balances as well, but the most common remains those formedical treatment. However, these debts are sometimes put on consumers’ accounts erroneously – through a typographical error or the like – and it is therefore important that you order a copy of your credit report as often as possible and check the document carefully for any potential errors that may be unfairly dragging down your credit rating.

Of course, if you do find an error, the burden is on you to prove that you don’t owe the balance a lender says you do, so it will be important to save all your financial documents and have them ready when contacting the credit bureau that issued your report.

Image: Hammer51012, via Flickr

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