Can Unpaid Medical Bills Bring Your Credit Down?

Filed under Credit

If you were wondering do unpaid medical bills make you have bad credit, then wonder no more. They do but the answer is not so simple. In the past unpaid medical bills were not counted toward your overall credit worthiness. It was overlooked by the reporting agencies and many medical facilities did not even bother to report a past due bill.

However, this has all changed. Hospitals, doctors and other private medical facilities are now perusing collection action with a vengeance. You will now find that your credit report will contain past due medical bills reported directly by the medical office or a collection agency.

How Much Does an Unpaid Medical Bill Hurt My Credit?

While these bills do not hold the same ramifications on your credit score, as does a past due credit card payment, they are still counted nonetheless. Excessive outstanding medical bills will quickly reduce your score and your ability to find financing in other areas.

The credit bureaus do not give a lot of point value to medical bills, but they do give some. Unpaid medical bills can bring your credit down. If you have excessive amounts of these medical bills it will hurt your score in two ways.

• One, you will quickly add up a lot of points for bad items, reducing your score.
• Second, you will have a large amount of bad entries listed on your report which will, in turn, reduce your score even further.

Some lenders are willing to overlook credit problems if it is found to be purely medical problems. This is because they realize that medical problems can and do occur due to no fault of the borrower. But this does not mean you should ignore them. Even small item medical debts can leave a flag on your account for up to 7 years.

Low credit scores can affect many areas of your personal and professional life. You will have a hard time receiving financing and may possibly be denied. You could be declined for employment or risk missing a promotion. Your insurance rates will rise, you will not meet the minimum requirements for an auto loan and you will be considered a high risk driver, regardless of your actual driving record.

How to Deal With and Pay Medical Bills

Medical bills can be a burden to pay. Everyone faces these problems in their daily lives. Try to establish a way to pay the bills payment on time to the best of your ability.

1. Work with the hospitals – Hospitals know that if you have medical bills and are unable to pay, they will find some way to help you manage your expenses. Recouping some money back is better than gaining nothing.
2. Create a payment plan – Mention a payment plan where you can pay a fixed fee every month. Make sure there are no additional interest and fees that are tacked on to the balance.
3. Ask them to lower your bills – Going back to the idea that hospitals want some money paid instead of nothing, some are open to reducing your medical bills. Depending on the leniency of the hospital, they might cut your bill in half.
4. Get an itemized list – Question all the expenses that were incurred down to the last pill. There should be no reason why you are paying more than retail price for a pill. Every single item that you used or they used on you should be accounted for with a price.

You do not want to be burdened with the bad credit score and everything that comes with that stigma, so find ways to handle that medical bill before it goes to collections and starts to hurt your credit. If you are in the situation where unpaid medical bills have already done damage, just remember that you can improve your credit in time.

Tags: Unpaid Medical Bills Hurt Your Credit

Different Ways to Borrow Money – Pros and Cons of Each Method

Filed under Credit, Lending Money

All of us need to borrow money at various points in our lives, but it often carries a negative connotation due to the ease with which we make bad decisions. It can be a good thing, such as when it facilitates money creation. However, the trouble arises when we borrow money because we are desperate, or when we have not devised a solid repayment plan. By being informed of  the different ways we can borrow money, you can make a decision on the process you are willing to consider. Here is a summary of the pros and cons of the most common money-borrowing avenues.

Pros and Cons of Borrowing Money

Family or Friends

The borrowing from friends and family is such an old tradition that the Bible speaks of it, and it has its very own set of proverbs. Borrowing in this manner is a great option for the short-term loan, but it puts an unfair burden on the lender long-term. Be careful with these loans. It’s not worth burning family bridges over them. Learn more about lending money to family members.

Secured Loans

Secured loans are the most common means of borrowing money. When we take a secured loan from the bank, we do so by backing it with security. A mortgage is a secured loan. The pros to secured loans are that they offer some of the lowest interest rates available. On the cons side, it can be a slow process to acquire one, and the bank has legal rights to the security. Learn more about getting the bank to lend you money.

Unsecured Loans

Unsecured loans are an excellent option for small, short-term loans from banks. The benefits are that they require no collateral, and you can access them very quickly. On the negative side of things, the interest rates are quite high, which make long-term unsecured loans impractical. Credit cards and Payday loans are considered forms of unsecured loans.

Credit Union Loans

Members of a credit union can often achieve secured and unsecured loans at better rates than a traditional bank will offer you. There are no cons other than those mentioned above regarding the specific type of loan. Learn more about why interest rates are lower at credit unions.

Margin Loans

Borrowers can achieve the best rates by borrowing from their own investments. One can even make short-term (60 days) loans against their IRA at zero interest. However, late payments or defaulting on the loan leads to stiff penalties because of the additional taxes and penalties.

Credit Cards or Overdraft

Credit cards and credit lines are excellent options for borrowing small amounts of money short-term. However, the interest rates are unfavorable, and quickly make long-term borrowing a poor decision.

It pays to consider your financial needs thoroughly, and then devise a repayment schedule. Armed with that knowledge, it’s much easier to pick the form of borrowing that works best for you.