How to Remove Medical Debt From Your Credit Report
When an individual gets into a serious accident or incurs a large sum of medical bills from an illness, it can be hard to repay the debts before the hospital turns the debts over to a collection agency. Once the debts are at a collection agency, they are placed as line items on that individual’s credit report.
Once the medical debt is paid in full, it stays on the individual’s credit report for 7 years — however, the medical debt stays on indefinitely if it is not paid in full or removed by the collection agency.
Some 43 million Americans have delinquent medical debt on their credit reports, amounting to about one in five credit reports, according to a report released Thursday by the Consumer Financial Protection Bureau. The bureau is calling attention to the burden that medical debt can create for consumers and the negative effect that it can have on their credit reports. The CFPB also created new reporting rules that could make it easier to spot errors.
Medical bills account for about half, or 52 percent, of all overdue debt that shows up on credit reports, the study showed. Many of these consumers would otherwise be deemed credit worthy: For 15 million people, medical debt is the only debt they have in collections in their credit report.
Instructions on how to Remove Medical Debt From Your Credit Report
1. Get a copy of your credit report from all three credit bureaus, Experian, Equifax, and TransUnion. Go to a website such as AnnualCreditReport.com and pull your free tri-merge report, which includes a credit report from each bureau.
2. Go through each medical debt listed to verify that it is yours. If not, contact the credit bureau through the website to contest the debt. Also, follow up with the collection agency to ensure that it corrects the information on its database as well. This should remove these items from your credit report.
3. Contact the original debtor, such as the hospital or doctor’s office, to see if they will take the debt back from the collection agency if you pay the debt in full. Some may choose this option, while others may leave it at the credit agency. If they take the debt back, make sure it is removed from your credit report as well.
4. Create a budget for your household. List all expenditures and all income. Try to find ways to increase your income and reduce your expenses. Use any extra money “found” in the process to pay off the remaining medical debts.
5. Make a list of all outstanding debts, including those in Step 3 that have been sent back to the original debtor. Include the debtor, the amount owed, and the monthly payment, if applicable.
6. Contact each debtor listed in Step 5 and request a payment plan with an affordable monthly payment.
7. Start to pay off the smallest monthly payment debt first until it is paid in full. Next, tackle the next smallest monthly payment.
While a strong payment history can go a long way toward improving a person’s credit score, most of the payments included are loan payments, such as credit card debt, car loans and mortgage debt. Some bureaus have started including rental payments along with other payments in people’s credit reports, but the practice is still limited.
The medical bills that are sent to collections and drag down credit scores are often minor, when compared to other debts. The average medical bill sent to collections was $579, compared to an average of $5,587 for auto loans.
But even small debts can hurt a person’s credit score. For instance, an unpaid bill of $100 can reduce a credit score of 680 by more than 40 points, according to one of the scoring models used by FICO. Someone with a score of 780 can see the score drop by more than 100 points.
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