The other day, while I was praying, a beggar passed by asking for Tzedakah. I threw in a dollar. The beggar was excited and gave me the following blessing; “May you never have any doctor bills or hospital bills”. I thanked him but did not put much thought to what he had said. 

However, standing next to me was an old fellow. He looked up and said to me, “Oh! What a beautiful blessing that was! It really would be great to live life without any doctor bills”.

I shall now bless my readers with the very same blessing.

In this post, we will discuss what you need to know if you unfortunately do get hit with a doctor bill and it goes for collection.

Medical collections - the threat

Usually, the biggest threat the medical collectors will use in order to convince you to make payments is that they will report the medical collection on your credit report. That in turn, will affect your credit score.

But is that true? Do medical collections get reported right away, and do they affect your credit score?

Medical collections - 180 Day Grace Period

Sometimes, a medical bill does not get paid due to the fact that the insurance did not kick in yet. Therefore in reality, it has nothing to do with the consumer. For this reason, in 2017, congress issued a law that medical collections cannot appear on your credit report until they are 180 days past due.

Many people confuse the grace period with thinking that the medical collection cannot be reported at all on your credit report. That is wrong. Medical collections can definitely show up on your credit report after they are more than 180 days past due.

Special medical attention

The newest Fico score (Fico 09) and the newest Vantage score (Vantage 04) give medical collections special attention. A medical collection will not affect your credit score as much as a non-medical collection. Also, with the Fico 09 scoring model, a paid collection will never affect your credit score.

But the issue is that, unfortunately, most lenders at this date, do not use the newest scoring models. DU requires mortgage lenders to use the Fico 04 scoring model. All credit card issuers, as far as I know, use the Fico 08 scoring model. With auto loans, I have seen Mazda/Chase use Fico 09, but most still use Fico 08.

Fico 08 and Fico 04 do not give any special treatment for medical collections. Therefore, a medical collection will affect your credit score just like any other collection.

Small dollar amount collections

It’s important to note that any collection under $100 does not affect credit with the Fico 08 (most often used) scoring model. The Fico 04, which is used for mortgage loans, does factor in even small collection amounts into the scoring model..

Not all collection companies report collections

Not every collection company will report an unpaid collection on your credit report. You can double check with the collection agency by asking them if they are a reporting collection agency or a non reporting collection agency.

Conclusion

So, to sum it up, based on the scoring models currently in use by most lenders, medical collections will affect your credit score just like any other collection mark. But you do have the 180 day grace period before it can get reported on your credit report. In this 180 day period make sure to either have your insurance pay the bill or at least negotiate a fair settlement with the collector. Often, the collector will be willing to settle for pennies to the dollar.

When dealing with any collection agency, it is important for you to know your rights. Read more about your rights under the FDCPA and NYC collection laws, here.

Thanks for being with us!