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The unbalanced effect of medical debt on a person's credit score

Ohio residents who are struggling with medical debt may find discussing the effect it has on their credit score interesting. Consumers may be negatively affected by this type of debt regardless of their willingness and ability to pay others.

A government report on how credit reporting agencies handle medical debt showed that poor health may have a bigger effect on credit ratings than some might think. In the study, it was determined that the agencies do not differentiate between medical and other debts. Over half of the debts collection agencies seek repayment on stem from medical care costs. Medical debts are often the result of unpredictable and catastrophic occurrences, different than most other debts. Additionally, in many cases, hospital mistakes can lead to billing errors the consumer is not aware of until the collection agency calls begin some time later.

Those with medical debt, however, are just as likely to pay back their other debts as those who have credit scores that are 10 points higher than theirs. This disparity between actual and perceived creditworthiness can have a large effect on a person's ongoing financial situation. For instance, interest rates may be higher, credit may be denied altogether and insurance premiums may go up due to the undervalued credit score. When a person is seeking lending on a large scale, such as a mortgage or business loan, increases in the interest rate can cost a borrower a lot of money over time.

In situations where medical debt, as a result of medical bills, is holding a person back financially, an attorney may be able to help. The attorney may be able to negotiate a settlement with the hospital or collection agency, or successfully dispute a debt that is not accurate.

Source: Main Street, "Why Does Being Unhealthy Ruin Your Credit Score?", Chris Metinko, July 07, 2014

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