Credit score drop is the last thing you would want, but when paying back debt becomes hard, it is something difficult to avoid. This is more so in the case of debts due to expenses incurred for treatment of major illnesses. The CFPB has been reporting debt collection as the major problem since 2013.

When the installments are not received on the due date, quite often, a credit rating agency is intimated. Consequently, the account is marked as an account in collection, leading to a drop in the credit score.

If you are also facing the same problem, do not think you are alone. Credit reports reflect a major chunk, i.e., 52% of the defaulting accounts are medical. About 43 million customers have at least one medical account in collection, as reported by a national agency’s report on consumers.

There are so many ill effects when an account goes into a collection that it is really important to overcome the situation as fast as possible. For example, it affects things of great importance like employment, insurance or housing. If your FICO score is 680, you can suffer a drop of 45-65 points, and that of 780 can lead to a drop of 105-125 points.

Collection practices with no accountability and absence of standards

The CFPB complaints have revealed that the consumers may not be aware that there is a medical debt on them, or they may not get enough time to pay back until their credit report shows an account in collection. No standard tells how delinquent the account should be to appear on a credit report. However, a medical account goes into the collection when the payment becomes due for 30-180 days. Collectors charge hefty amounts when they contact customers with credit reports.

Confusion caused by several bills collectors and providers

Medical bills can be lengthy and confusing as multiple bills from various providers may be included. Health insurance covers not all service providers. The medical bill may include the fees of the surgery facility, the, and the surgeon. The bill may not be fully covered, and only some providers and procedures may be paid. It may not be easy to ascertain what one owes, to whom and for what.

Debt payment can become really confusing when the medical account goes for collection. Complications arise when third-party collectors hired for short term by medical providers make collections. These collectors may also be given the job through another challenging, resulting in poor communication between the medical provider and the collectors. In such situations, customers may not be able to find how much they owe and if at all they are under debt.

Medical debt not the right indicator of consumer’s credit record

Out of the millions of medical accounts in collection, most of them suffer this fate due to lack of proper communication with the account holders. These customers may be willing to pay their dues as it has been noted that 50% of people, who have their medical accounts in the collection, have a clean credit history. According to a 2014 medical debt report, non-payment of medical dues may not be a good indicator of a customer’s credit history or their future ability to maintain good credit history, as it was thought before.

While a medical account under a collection may cause lowering of credit scores, the actual debt may be very small. It has been observed that at least half of the debts that go to the collection are below $207. This itself is an indicator that the consumer may be able to pay them but they are either confused as to how much they have to pay or think that their dues have already been paid or they don’t know that they owe money to the medical provider. This is where credit scores that deal with medical and non-medical dues, in the same way, go wrong. You can get in touch with the professionals and know more from nationaldebtrelief.com.

Vulnerable customers facing more issues

The system of collection and billing of medical dues has become even more complicated for those customers who may have incurred the medical expenses due to long treatment in the hospital or emergencies. These customers often lack energy, time and resources to plan for the payment of debt on time. It is therefore essential for the customers to find out how much insurance coverage they have and the categories of expenses that will be covered by their policy.

Further, consumers who require language assistance or those helping them may face more difficulty in finding out or resolving the dues with agencies making the collection. The 2014 debt report showed that consumers with medical debts were more likely to claim that they had already paid their dues, and this could be twice the number of people that make a claim their debts paid under other categories. While 8.4% of consumers said they had paid the due for non-medical dues, 20.1% with medical debts claimed payment and point out inadequate or no information as the reason for non-payment.

Failure of the existing system of medical debt collection to work for consumers

The problem could be resolved to a great extent if medical providers and collectors followed a standardized procedure for collecting dues that reflected customers’ debt payment behavior more accurately in the credit score.

A step has been taken in this direction has been taken by IRS, which would prevent a non-profit hospital from hiring a third-party collection agency for reporting non-payment of the debt to a credit rating agency before 120 days. Recently a debt collection association and a health service provider association have come up with a similar standard to ensure best practices for billing, collection, and reporting of a payment default. This step is also meant to ease wrong billing of medical dual by hospitals and reporting of medical debts by credit rating agencies.

It is necessary that hospitals verify the patient’s medical debts carefully before sending a medical account into collection. Consistency and accuracy in reporting may have bigger repercussions for consumers struggling to ascertain the amount of medical bill and cope up with the cost of healthcare. This will result, additionally, in developing a strong credit system and more reliable credit predictability.