The Connection Between Healthcare and Credit Scores

If you live in the United States, you know that many people struggle to make their medical bill payments on time. The medical provider could turn the account over to a collection agency if they are not paid. People are still contacted by debt collectors most frequently for medical debt. In Canada, medical healthcare bills can also accumulate if they are not paid on time, especially if you aren’t a citizen. Your credit score is a very important part of your financial journey. Whatever you do that includes paying money - affects your credit score one way or another.

The two primary goals of healthcare providers are to treat patients well and get paid for their services. When you go in to see a doctor and don’t have insurance, you might need to pay for the service out of your pocket in both Canada and the United States. Moreso in the US, surprise medical bills can also dig into your personal finances.

Unpaid medical debt can harm your credit rating and make it harder for you to borrow money, purchase a house, or find a job. Medical debt poses a unique risk: Payment history is the most significant factor in credit rating. If you put off paying significant medical expenses because you are engaged in protracted discussions with providers and insurers, your credit may suffer as a result.

In Canada it’s entirely possible to also wind up underwater from unpaid medical expenses. While the Canadian government covers doctors visits, specialists, hospital stays and rehabilitation, it won’t cover such things as certain types of drugs, dental, vision and assistive devices. In fact, according to Bankruptcy-canada.ca, “Medical issues are noted as one of the leading causes of bankruptcy in Canada”.

Why Do Healthcare Providers Check Patients’ Credit Reports in the U.S.?

Credit reports can help determine whether a patient can pay off a large medical bill. This technique, nevertheless, is debatable and might be bad for the doctor-patient relationship. Providers must ultimately decide if they want to take the chance of compromising the patient experience.

Since high-deductible health plans (HDHP) were introduced in the United States, patient balances have increased. Patients in these plans must first pay a deductible fee before covering most medical expenses. With increased out-of-pocket expenses, HDHP was believed to prevent pointless provider visits. 

With the HDHP in place, many patients still find it difficult to pay their medical bills, leaving providers with no choice but to turn the account over to a collection agency.

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Can Medical Debt Affect Your Credit Score?

Depending on how and when you pay your medical costs, this could have an impact on your credit. The most common way is when you don't pay the bill for a while, and your healthcare provider passes the account to a third party. If that occurs, your credit score will be impacted though it can take a year for them to show up on your credit report. 

Using a credit card to pay for your medical expenses may also affect your credit, particularly if you cannot pay the bill in full. Paying an expensive medical bill with a credit card may also impact your credit utilization ratio, which is a key determinant of how much of your available credit you are spending.

Understanding your alternatives and how they could affect your credit is important. Working with your insurance company to know your coverage options, in-network estimates, and more is a good idea. Before scheduling a doctor’s appointment or procedure, this knowledge may help you avoid unforeseen medical costs. Depending on the category you belong to, there are many alternatives. There are health insurance options for self-employed, unemployed, and even students.

How to Prevent Medical Debt from Affecting Your Credit Score

One of the greatest ways to stop medical costs from showing up on your credit reports is to be proactive. You may completely avoid the collections procedure by reviewing each medical bill carefully and establishing a payment schedule with the healthcare provider.

Review Every Medical Bill For Errors

Create a Payment Plan With Your Healthcare Provider

Check With Your Insurance Company to Know if They Can Cover the Debt

Pay the Debts

Looking for Different Ways to Eliminate Debt?

Keep reading here to know more ways to eliminate debt while building your credit score.

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Conclusion

Now that you know how your medical debt impacts your credit score, you should know how to manage it. If you're still unable to pay your medical bill, you might want to seek more assistance to help you deal with it and, ideally, prevent damaging your credit. In either case, keeping an eye on your credit score is smart. Numerous websites offer free credit score monitoring and calculation tools. It should enable you to monitor changes in your credit score and assist you in maintaining financial restraint.

For the last ten years, Insurdinary has been helping Canadians make better money decisions by way of our credit card, loans, bank account, investment, mortgage and of course insurance offers. Your path to financial wellness begins right here. Visit our website, and discover what millions of other Canadians already have.