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Michigan, do you know how medical debt impacts your credit score?

Many of us have seen the sign in the doctors or dentists offices stating 'payment in full due upon receipt of services' or something similar. Mainly that is because doctors and dentists in Michigan and elsewhere do not want to set up payment plans with their patients as they are in the business of practicing medicine, not credit or collections. That is why doctors and other health care providers do not necessarily report medical debt to collection agencies, unlike credit card companies and or mortgage lenders.

But like credit card companies, health care providers will turn over their past due accounts to third party collection agencies after attempting to collect a past due amount for a few months. Once a collection agency has your past due account you can be sure it will report your delinquency to the three main credit bureaus and thus your credit score will be impacted. Both credit card and medical debt are considered unsecured debt and thus can be discharged in a bankruptcy.

After your medical debt is reported to the credit bureaus the negative impact on your credit or FICO score is the same as any other debt. And when you pay off or settle a medical collections account, it is not removed from your credit report, as one might think. There was some reprieve in the latest generation of FICO's credit risk scoring system, which some refer to as 'FICO 08,' however it only helped consumers by ignoring collection accounts with an original collection balances of under $100.

When many people see their credit score and notice medical debt collection efforts on their credit report they are surprised. It can be next to impossible to remove such items from your credit report as well. Only the original service provider can remove such an item, or only in cases of erroneous reporting can you get these successfully removed from your report. And you may hear about 'pay for delete' services, but be wary of fraudulent claims.

In some cases, your best bet is to contact a bankruptcy attorney if you are being harassed by debt collectors you feel are breaking the law or otherwise making your life miserable. Remember that medical debt is considered unsecured debt and thus, by law dischargeable in a bankruptcy, as is most credit card debt.

Source: Business Insider, The Truth About How Medical Debt Really Impacts Your Credit Score," John Ulzheimer, June 25, 2012

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