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Outstanding medical debt can affect credit rating

Monetary burdens caused by skyrocketing medical costs are affecting Americans all across the country -- Michigan included. Unlike a car loan or a mortgage, where the price and terms are known beforehand, medical costs are often unknown until after treatment has already been provided. Whether a huge sum or relatively small amount, medical debt that goes unpaid can have long-term financial consequences, including lowering a person’s credit rating.

According to the Consumer Financial Protection Bureau, numerous consumers are unaware that they have a medical debt that has been passed to a collection agency. Bills that have made it to this point are often difficult to negotiate and may end up being reported to the credit bureaus. That could affect a person’s overall credit score for years. Lower credit scores can influence other financial aspects, including interest rates, lines of credit and other loans.

It would serve in a person’s best interest to review all medical bills and attempt to negotiate with the medical provider directly before any outstanding debt makes its way to a collection firm. It may be entirely possible to fight certain charges or even work out an affordable payment plan that fits a patient's current financial situation. Some individuals may also qualify for financial aid through their medical provider.

For those who have already had medical debts sent to collections, one of the big concerns is the length of time this debt will remain on their credit report, even if the debt does get paid in full. A newly proposed law called the Medical Debt Responsibility Act would, if passed, provide some relief by requiring debt collectors to remove negative comments from credit reports within a 45 day timeframe after the debt was paid or settled. This could provide better financial opportunities for the individuals affected.

Michigan residents with outstanding medical bills in collections may have legal options to help clear and remove the debt from their credit profile -- such as out-of-court settlements. For others who have a significant amount of debt, stronger actions may be necessary. A bankruptcy filing may clear debts and allow for a fresh financial start.

Source:, "Medical debt can have long-term consequences", Tim Grant, June 11, 2014

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