Do medical collections hurt your credit score?
Medical collections can be a source of concern for many individuals, especially when it comes to their credit scores. Understanding how medical collections can impact your creditworthiness is crucial in managing your financial health. In this article, we will explore the relationship between medical collections and credit scores, and provide insights on how to mitigate the negative effects on your credit.
What are medical collections?
Medical collections occur when a healthcare provider has not been paid for services rendered and has turned the debt over to a collection agency. This can happen for various reasons, such as billing errors, insurance disputes, or simply due to the patient’s inability to pay. Once the debt is transferred to a collection agency, it becomes a medical collection, which is then reported to the credit bureaus.
Impact on credit scores
Medical collections can have a significant impact on your credit score. Credit scoring models, such as FICO and VantageScore, take into account several factors, including payment history, the amount of debt owed, the length of credit history, and the types of credit used. When a medical collection is reported to the credit bureaus, it can lower your credit score in several ways:
1. Negative payment history: A medical collection is considered a delinquent account, which negatively impacts your payment history. The longer the delinquency, the more severe the impact on your credit score.
2. High debt-to-income ratio: Medical collections can increase your overall debt, which in turn raises your debt-to-income ratio. A high debt-to-income ratio can lead to a lower credit score.
3. Length of credit history: Medical collections can also affect the length of your credit history, as they are typically reported for up to seven years from the date of the first delinquency.
Strategies to mitigate the impact
While medical collections can be damaging to your credit score, there are ways to mitigate their impact:
1. Pay off the collection: If possible, paying off the medical collection can help improve your credit score. Once the collection is paid, it will be reported as “paid” to the credit bureaus, which can help improve your score over time.
2. Dispute inaccuracies: If you believe the medical collection is inaccurate or not yours, you can dispute it with the credit bureaus. If the dispute is successful, the collection may be removed from your credit report.
3. Monitor your credit: Regularly monitoring your credit report can help you stay informed about your credit score and identify any errors or discrepancies. You can request a free credit report from each of the three major credit bureaus once a year.
Conclusion
Medical collections can indeed hurt your credit score, but understanding their impact and taking proactive steps to address them can help minimize the damage. By paying off the collection, disputing inaccuracies, and monitoring your credit, you can work towards improving your creditworthiness and protecting your financial future.
