What if you cannot pay a medical bill? Fortunately, federal consumer protection laws offer some measure of protection. In addition, medical debt, in recognition of the unpredictability of necessary medical care, is treated more leniently than regular consumer debt such as car or credit card payments. Here are nine things you need to know about medical debt and your credit score:
1) It generally does not carry late fees and requires low or no interest payments.
2) Do not prioritize it over other kinds of debt such as delinquent credit card payments. It is treated more leniently in credit scoring than other liabilities.
3) Collection agencies purchase your debt from hospitals and providers. They will report the debt to the credit bureaus if they fail to collect from you.
4) Credit bureaus must wait 180 days before listing it on your credit report. This grace period (also knows as a waiting period) allows time to resolve the disputes before a bill is considered overdue.
5) On the FICO scale of 300 to 850, a medical debt that is reported to a collection agency can potentially decrease a good score 50 to 100 points.
6) VantageOne and FICO Score 9, the dominant credit scoring models, give medical debt less weight than other liabilities.
7) Nonpayment is not a crime, but a creditor or collection agency can sue you in civil court and seek liens on your property or garnishment of your wages. Social Security and veterans benefits cannot be garnished for medical debt.
8) The decision to sue for it depends on the amount. Amounts less than $1,000 are rarely pursued through the legal system.
9) It is expunged if it has been paid or is being paid by insurance.
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