medical bills

How Does Medical Debt Affect Your Credit Score?

Rachel — Thu, 27 Apr 2017 09:32:30 +0000

How Does Medical Debt Affect Your Credit Score? Rachel Thu, 04/27/2017 - 05:32

Medical debt can tank your credit score
Image Source: Flickr User Claus Rebler

Medical debt is unique among other types of debt because of the complications of the insurance intermediary. This is also debt you generally don’t get into voluntarily unlike a mortgage, car loan, or credit card bill. Medical debt is a plague on the uninsured and insured alike thanks to changes in coverage that now require hefty deductibles and co-insurance for many consumers. Despite advances like the Affordable Care Act, medical debt continues to be a burden and, yes, it can lower your credit score.

How Medical Bills Drag Your Credit Score Down

Unlike a standard credit card bill or car payment that are reported monthly on your credit report, medical bills don’t automatically report. Medical practitioners don’t report patients that are a few days or weeks behind on a bill. However, once a bill has been outstanding for a few months, the medical provider will generally hand it over to a debt collector and they will report the delinquent debt to one (or all) of the three U.S. credit agencies – TransUnion, Equifax, and Experian.

What If Your Insurance Owes the Bill?

Even if your insurance provider owes the bill, that doesn’t mean they will pay up promptly. The bottom line is when you accept treatment, you sign an agreement saying you are responsible for the cost of the procedure, treatment, etc. There is usually fine print that says the provider will file the insurance claim but that comes with the caveat that the debt is still yours. That means you can be tangling with your insurance company who is delaying payment and the debt winds up on your credit score, dragging it down.

How Many People Have Unpaid Medical Debt?

According to ConsumerFinance gov, nearly one-third of consumers have debt in “collections,” meaning it’s past due and is being actively pursued by a debt collection agency or collection arm of the original creditor. Of all debt in collections, more than half of it is medical debt. That equates to nearly 20% of consumers or more than 73 million Americans who are seeing damage to their credit score because of medical debt in a delinquent and collections status.

Can You Remove Medical Debt From Your Credit Report?

If you have a medical bill that’s reported for debt collections, it can turn into a nightmare. It’s doubly frustrating when you don’t owe the medical bill yet it winds up on your credit report. Once the debt goes into the collections stage, even if you or your insurance firm pays it, the collection entry will stay on your credit report for seven years or more from the date the bill went delinquent. The collection agency doesn’t have to remove it even if you pay the debt, so you may be stuck.

Even If You Pay, Medical Debt Can Ravage Your Credit Report

The same report by ConsumerFinance showed that even if customers disputed an inaccurate delinquent medical debt account or paid it in full, creditors and collection agencies often fail to update the credit report to show that there is no balance owed. Credit card companies, mortgage lenders, and auto finance companies update accounts monthly, but those that don’t report regularly, such as collectors for medical debt, utilities, and cellular accounts, are more lax and can leave damaging info on your credit.

New Credit Score Models Will Change Things (Maybe)

Fair Isaac Corporation (FICO) has downgraded the weight of medical debt in its latest calculation, FICO 9, because they’ve undertaken studies that indicate overdue medical debt is not an accurate predictor of overall credit worthiness. However, many lenders don’t enroll in the latest score calculation subscription so this might not help you. VantageScore is also updating their latest score towards trending data which will put less emphasis on medical debt but, again, new models take a while to take hold.

Bankruptcy Can Help With Medical Debt

Because medical debt is unsecured debt, it can be wiped out totally with Chapter 7 bankruptcy and with Chapter 13 bankruptcy, unsecured debt is usually greatly diminished. For consumers mired in medical debt that insurance doesn’t cover, bankruptcy may be the answer. Many medical bankruptcies are triggered by a serious accident or illness (such as cancer) that skyrockets expenses while simultaneously decreasing income. Once recovered, the debt left over can be crippling. Bankruptcy can help.

After bankruptcy, when your medical debt is cleared up, along with other obligations, it’s time to focus on rebuilding your credit. That’s where Credit Score Keys comes in – and we’re ready to help you today. Call 919-495-2365.

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Consumer Finance study

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Changes to FICO Credit Score Calculation Can Benefit Those Dealing with Medical Debt

Rachel — Thu, 18 Aug 2016 07:04:26 +0000

Changes to FICO Credit Score Calculation Can Benefit Those Dealing with Medical Debt Rachel Thu, 08/18/2016 - 03:04

FICO score changes may impact the effect of your medical debt on your credit
Image Source: Flickr CC User Jay Gorman

The purpose of a credit score is to help potential creditors and lenders assess whether you’re a good risk for a loan, credit card, or other debt. Your credit score should reflect your financial behavior. But when it comes to medical bills, your FICO score sometimes puts you in a worse light than you deserve. Fortunately, new credit score models may change some aspects of your financial track record – including medical debt.

New Scores Will Reduce the Impact of Medical Bills

Before the new FICO scoring models were developed, all bills weighed similarly on your credit report. Leaving a credit card bill unpaid could affect you in the same way that an unpaid doctor bill would – but medical debt is often not an accurate assessment of your financial behavior. Even those with health insurance (a greater percentage now thanks to the Affordable Care Act) can still be stuck with unmanageable out-of-pocket costs through no fault of their own. In fact, roughly 20% of US workers (those out of school and pre-retirement) have medical debt they cannot afford to pay.
And some cases, medical bills may linger because the consumer is working with their physician or insurance company to get a billing issue corrected for an expense that insurance should have covered. In other cases, the medical provider might not send their statement to the patient in a timely manner – or the insurer could mishandle the bill. Under the old FICO scoring model, all this would have negatively impacted your credit score.

How FICO 9 Calculations Change the Weight of Medical Bills

The FICO 9 score lessens the impact of medical debts in collection on your credit score. You may not realize this, but when one of your debts goes bad and your creditor turns it over for debt collection, this event triggers a second entry on your credit score. You may end up with two entries for a single debt – one from the creditor and one from the debt collection agency. In some cases, that means the effect on your credit score can be doubled.
But with FICO 9, medical debt collections will carry lesser weight. If medical bills are your only negative items, you may see a credit score increase of 25 points or more from nothing more than this change in the calculation. However, it’s important to know that not every creditor or lender will use this new scoring model. The FICO score is a subscription service, and creditors can subscribe to whichever version of the score they prefer.

Who Will Be Affected by the New Scoring Model?

Veterans, in particular, may be harder hit by medical bills if they rely on the VA for their medical care. If the VA is slow about processing a service payment for medical treatment for a veteran, the veteran may end up with a collections agency pursuing them for debts the VA should have paid. That doesn’t seem fair, but it’s the harsh reality. But with this new scoring model, the effect of the VA’s late payment habits would not affect a veteran’s credit score as much.
Do you have medical bills you can’t pay? If you’re overwhelmed with doctors' bills and can’t dig your way out, Chapter 7 bankruptcy offers the chance to have all your medical bills completely discharged within weeks of filing. This can be life changing. Then, after you file bankruptcy and clear your financial slate, you can get a fresh start by working to improve your credit score.

To find out more about rebuilding credit after bankruptcy, contact Credit Score Keys today. We help North Carolina consumers bounce back after bankruptcy and get the credit they deserve. Call 919-495-2365 today for a free consultation about improving your credit score after bankruptcy.

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Deep in Medical Debt? Surprising Reason Your Credit Score May Be Going Up Soon

master — Mon, 20 Oct 2014 14:41:58 +0000

Deep in Medical Debt? Surprising Reason Your Credit Score May Be Going Up Soon master Mon, 10/20/2014 - 10:41

One of the main concerns when you can't pay your bills is the impact it will have on your credit score. Your credit score determines how much you pay in credit card interest, for auto and homeowner's insurance, whether you can get a cell phone contract and if you can get a job you want. Medical bills are one of the leading causes of bankruptcy, but a new version of the calculation that will be implemented by FICO this fall will change things for those with lingering medical debt.

Who or What Is FICO?
FICO is the firm that created the credit score calculation used by Equifax, Experian and TransUnion. On August 7th, the company announced changes in their calculations concerning both paid accounts in collections as well as past-due medical bills. Currently, medical bills account for roughly half of unpaid collections on credit reports and is also a major driver in bankruptcy filings. The FICO modification won't make those bills go away, but will make it easier on consumers dealing with them.

How Much Will This Change Up Your Score?
For those that have no other credit problems except for medical bills, this could cause an increase of 25 points based on the new calculation. This is enough of an increase to get better interest rates on credit cards, loans and other financing which can ultimately save consumers thousands of dollars. This likely won't be enough to turn a “no” to a “yes” but can change the rates you're offered. Still, it's fair that medical bills not carry as much weight because studies have shown they're not an apt predictor of whether you'll pay.

New Change for Paid Collections Account
This update to the credit score calculation also includes a modification for debts in collection that have been paid. Historically, both paid and unpaid collection accounts were weighed equally but, now, paid collection accounts will be ignored. So if you settle a debt with a collection agency such that it shows paid, it will not count as a negative toward your score. This is fair because you've settled the debt and shouldn't have it continue to drag you down for years to come.

When Will This Change Take Effect?
FICO will start using the new calculation this Fall, but you should know that not every FICO customer may choose to use this revision. This is part of FICO Score 9, the latest update, but not every customer will choose to use the latest update. When FICO released their version 8 back in 2008, roughly half of their customers adopted the latest version. So the upshot is that while FICO is changing their tune on past-due medical bills and paid collection accounts, you may not reap the benefits immediately depending on which calculation model creditors choose to use. But, overall, this is still promising news.

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4 Ways to Keep Your Prescription Medication Costs from Causing Financial Disaster

master — Sat, 06 Sep 2014 18:36:37 +0000

4 Ways to Keep Your Prescription Medication Costs from Causing Financial Disaster master Sat, 09/06/2014 - 14:36

We've written here before that more than half of bankruptcies and serious financial circumstances are caused by medical costs and chief among these is unmanageable prescription medication costs. Even with the onset of the Affordable Care Act, prescription drug costs are high and rising. This unfortunate situation is made worse if you're on a fixed income or have a chronic condition that requires ongoing (and costly) medications such as a heart condition, high blood pressure, diabetes. These costs are so onerous that roughly 50 million people each year go without needed medication. If you're struggling to pay for your medications, here are a few tips to help safeguard your health and wallet.

#1 Don't Pay for Your Medication with a Credit Card
You may not think you have any other alternative than to charge your prescriptions on a credit card, but this is a recipe for disaster. If you can't pay your balance off in full each month, the cost of interest alone adds 25% to your drug costs. And if you max out your cards and interest piles on interest and late fees accrue, you could end up with a bill that can be several times more than the initial cost of your medication.

#2 Appeal to Your Insurance Company and Physician
Insurance companies seem to be in the business of saying no and doctors often write prescriptions for medications they've been given samples of or that are heavily promoted to them rather than what's the lowest cost option for you. If your medications are unaffordable, first go to your doctor with your insurance plan's drug list and ask for an equivalent product that your insurance covers or at least covers without such a hefty co-pay.
If there is no cheaper alternative, appeal to your insurance company to expand their coverage for the medication you can't do without. If you want to double check the medication selection your doctor has made, talk to your pharmacist – they know much more about insurance and pricing than doctors and have intimate knowledge of drug equivalencies and generics – plus, they won't charge you a co-pay or fee to share their knowledge.

#3 Appeal to the Prescription Drug Manufacturer
Many drug manufacturers offer programs that give substantial discounts on, or offer free, lifesaving drugs to cash-strapped patients that need their medications. PhRMA, the coalition of Pharmaceutical Research and Manufacturers of America, has launched an initiative called the Partnership for Prescription Assistance that “connects qualified, low-income people with discount prescription drugs, direct from the pharmaceutical manufacturer.” Click here for the North Carolina portal to see if you qualify for assistance.

#4 Check Out North Carolina Medication Assistance Programs
There are also a number of North Carolina specific programs to help patients afford their prescription medications. These are all worth checking into – the time you spend online researching and making calls for assistance may add up to significant savings each month for you. NC MedAssist operates as a community pharmacy to low-income and fixed-income consumers in our state and may be able to help you reduce your medication costs.
Our state's Department of Health and Human Services offers assistance and information on medications that are needed for mental health and substance abuse conditions. They offer data sheets showing what the comparative costs for your meds are at different local pharmacies. They also recommend trying the Community Assistance Program, which allows you to print a discount card to use if you're uninsured. Finally, they suggest trying another private card program – the North Carolina Drug Card – to look for better deals.

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medical bills

Are You a Veteran Hit by the VA Crisis Plus Money Problems? See How Chapter 7 Helps

master — Thu, 04 Sep 2014 18:23:42 +0000

Are You a Veteran Hit by the VA Crisis Plus Money Problems? See How Chapter 7 Helps master Thu, 09/04/2014 - 14:23

You've likely heard about the Veteran's Administration scandal and about all the veterans that have had medical care delayed, denied and other horrible issues that are costing former service members their health and, in some cases, their lives. The good news is that prior to his ousting, VA chief Eric Shinseki authorized an expansion of private care for those experiencing chronic delays in receiving medical care.

The bad news for many veterans is that health problems usually lead to money problems that can be difficult to escape for those on a fixed income like retirees. This circumstance is worse yet for those veterans subsisting on military disability pay. It's important to know that in North Carolina, medical bills are considered joint debts and if you lose your health struggle, your spouse will be left with any medical costs the VA doesn't cover, or if you had to seek private care because you couldn't wait for the VA to take care of your needs.

How Chapter 7 Impacts Veterans
Your bills will be treated just as with anyone else in Chapter 7. Your secured debts, including credit cards, medical bills, past utility bills, cellphone bills and other debts like this will be discharged. Income taxes that are past due for a few years but that you properly filed your return on should also be discharged. If you have student loans and are disabled or in a very low income situation, these may also be able to be discharged.

How Does Chapter 7 Treat Military Retirement Pay and Disability Pay?
In most cases, Veteran's benefits, including disability pay, do count as income in the means test that determines if you qualify for Chapter 7. On the flip side, they don't count as income that is available to your debtors to pay bills. That sounds like an oxymoron, but it's the law. So long as you pass the means test, your VA benefits will be exempt from paying bills. And, if you don't pass the means test, you can still qualify for a Chapter 13, but the VA money won't be accessible by your creditors.

Getting a VA Mortgage After Your Bankruptcy
You can still get a VA mortgage after a Chapter 7 once you pass a 24 month waiting period, even if you lose a home you purchased under the VA loan program to foreclosure during or after the bankruptcy. Filing bankruptcy doesn't permanently end your benefit to this advantageous loan program – this offers great peace of mind that you can use your benefits to borrow for the first time, or again, after your debt dilemma is resolved.

How Does Filing Bankruptcy Affect Your Other VA Benefits?
In short, it doesn't. All of your medical benefits, income benefits, disability and other benefits will remain intact and are not accessible to your creditors for your bills and will not be impacted, changed or diminished in any way by filing bankruptcy. And, best of all, you'll be free of your unsecured debts so the money you do have will go farther to help you live a comfortable life. You deserve peace of mind after your dedicated service to our country.

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medical bills

4 Ways to Keep Your Prescription Medication Costs from Causing Financial Disaster

master — Sun, 15 Jun 2014 12:26:15 +0000

4 Ways to Keep Your Prescription Medication Costs from Causing Financial Disaster master Sun, 06/15/2014 - 08:26

Image source: Flickr Creative Commons user Kathy Sunderman

We've written here before that more than half of bankruptcies and serious financial circumstances are caused by medical costs and chief among these is unmanageable prescription medication costs. Even with the onset of the Affordable Care Act, prescription drug costs are high and rising. This unfortunate situation is made worse if you're on a fixed income or have a chronic condition that requires ongoing (and costly) medications such as a heart condition, high blood pressure, diabetes. These costs are so onerous that roughly 50 million people each year go without needed medication. If you're struggling to pay for your medications, here are a few tips to help safeguard your health and wallet.

#1 Don't Pay for Your Medication with a Credit Card

You may not think you have any other alternative than to charge your prescriptions on a credit card, but this is a recipe for disaster. If you can't pay your balance off in full each month, the cost of interest alone adds 25% to your drug costs. And if you max out your cards and interest piles on interest and late fees accrue, you could end up with a bill that can be several times more than the initial cost of your medication.

#2 Appeal to Your Insurance Company and Physician

Insurance companies seem to be in the business of saying no and doctors often write prescriptions for medications they've been given samples of or that are heavily promoted to them rather than what's the lowest cost option for you. If your medications are unaffordable, first go to your doctor with your insurance plan's drug list and ask for an equivalent product that your insurance covers or at least covers without such a hefty co-pay.

If there is no cheaper alternative, appeal to your insurance company to expand their coverage for the medication you can't do without. If you want to double check the medication selection your doctor has made, talk to your pharmacist – they know much more about insurance and pricing than doctors and have intimate knowledge of drug equivalencies and generics – plus, they won't charge you a co-pay or fee to share their knowledge.

#3 Appeal to the Prescription Drug Manufacturer

Many drug manufacturers offer programs that give substantial discounts on, or offer free, lifesaving drugs to cash-strapped patients that need their medications. PhRMA, the coalition of Pharmaceutical Research and Manufacturers of America, has launched an initiative called the Partnership for Prescription Assistance that “connects qualified, low-income people with discount prescription drugs, direct from the pharmaceutical manufacturer.” Click here for the North Carolina portal to see if you qualify for assistance.

#4 Check Out North Carolina Medication Assistance Programs

There are also a number of North Carolina specific programs to help patients afford their prescription medications. These are all worth checking into – the time you spend online researching and making calls for assistance may add up to significant savings each month for you. NC MedAssist operates as a community pharmacy to low-income and fixed-income consumers in our state and may be able to help you reduce your medication costs.

Our state's Department of Health and Human Services offers assistance and information on medications that are needed for mental health and substance abuse conditions. They offer data sheets showing what the comparative costs for your meds are at different local pharmacies. They also recommend trying the Community Assistance Program, which allows you to print a discount card to use if you're uninsured. Finally, they suggest trying another private card program – the North Carolina Drug Card – to look for better deals.

If your medical bills and prescription costs have piled up along with other unsecured debt so that you're forced to make choices that put your health at risk, bankruptcy may be a viable solution for you. Contact the law offices of John T Orcutt to find out how your finances may improve if your medical bills, credit card debt and other unsecured debt is cleared out of your life for good. Call today for a free consultation.

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Are You a Veteran Hit by the VA Crisis Plus Money Problems? See How Chapter 7 Helps

master — Sat, 14 Jun 2014 12:26:14 +0000

Are You a Veteran Hit by the VA Crisis Plus Money Problems? See How Chapter 7 Helps master Sat, 06/14/2014 - 08:26

Image source: US Army via Flickr Creative Commons

You've likely heard about the Veteran's Administration scandal and about all the veterans that have had medical care delayed, denied and other horrible issues that are costing former service members their health and, in some cases, their lives. The good news is that prior to his ousting, VA chief Eric Shinseki authorized an expansion of private care for those experiencing chronic delays in receiving medical care.

The bad news for many veterans is that health problems usually lead to money problems that can be difficult to escape for those on a fixed income like retirees. This circumstance is worse yet for those veterans subsisting on military disability pay. It's important to know that in North Carolina, medical bills are considered joint debts and if you lose your health struggle, your spouse will be left with any medical costs the VA doesn't cover, or if you had to seek private care because you couldn't wait for the VA to take care of your needs.

How Chapter 7 Impacts Veterans

Your bills will be treated just as with anyone else in Chapter 7. Your secured debts, including credit cards, medical bills, past utility bills, cellphone bills and other debts like this will be discharged. Income taxes that are past due for a few years but that you properly filed your return on should also be discharged. If you have student loans and are disabled or in a very low income situation, these may also be able to be discharged.

How Does Chapter 7 Treat Military Retirement Pay and Disability Pay?

In most cases, Veteran's benefits, including disability pay, do count as income in the means test that determines if you qualify for Chapter 7. On the flip side, they don't count as income that is available to your debtors to pay bills. That sounds like an oxymoron, but it's the law. So long as you pass the means test, your VA benefits will be exempt from paying bills. And, if you don't pass the means test, you can still qualify for a Chapter 13, but the VA money won't be accessible by your creditors.

Getting a VA Mortgage After Your Bankruptcy

You can still get a VA mortgage after a Chapter 7 once you pass a 24 month waiting period, even if you lose a home you purchased under the VA loan program to foreclosure during or after the bankruptcy. Filing bankruptcy doesn't permanently end your benefit to this advantageous loan program – this offers great peace of mind that you can use your benefits to borrow for the first time, or again, after your debt dilemma is resolved.

How Does Filing Bankruptcy Affect Your Other VA Benefits?

In short, it doesn't. All of your medical benefits, income benefits, disability and other benefits will remain intact and are not accessible to your creditors for your bills and will not be impacted, changed or diminished in any way by filing bankruptcy. And, best of all, you'll be free of your unsecured debts so the money you do have will go farther to help you live a comfortable life. You deserve peace of mind after your dedicated service to our country.

Contact the law offices of John T Orcutt for a free consultation now. We are North Carolina bankruptcy experts and understand how to best protect your VA and military benefits during the Chapter 7 or Chapter 13 process.

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