How Do Medical Collections Affect My Credit Score?

Learn How a Medical Collection Differs From Other Types

Medical collections are the most common type of collection account. While a reported average of 1 in 5 Americans is struggling with medical bills, you an imagine how this could quickly become a problem for many people. You probably are aware that collections affect your credit score. However, you might not completely understand what differentiates a medical collection from any other type of collection. Understanding the difference will definitely help you on the path of improving your credit.

The first thing to tackle when trying to grasp how collections affect your FICO score is to first understand what a collection actually is. When you find a collection on your account that in fact, does belong to you, it is essentially money that you owed a creditor, doctor, etc. that was never paid, they wrote it off as a loss and sold your account to a collection agency. Once it reaches this stage is when you start to receive those pesky and incessant phone calls from the collection agency that the debt was sold to. Not only are you being hounded for money, but this collection is more than likely being reported to the credit bureaus, which is now having an impact on your credit score.

We understand how much medical collections hurt your score as well as your health and physical condition in most cases. Typically your health or the well-being of a loved one is the priority above dealing with bills, insurance companies and hospitals contacting your for payment. Our best advice is to do your best to be as proactive as possible and to either pay the bill in full or get on a payment plan immediately. A majority of the medical collections that we see could have been avoided by simply getting on a low, monthly payment plan to prevent it from being sent to a collection agency in the first place. While it seems like a daunting task in the moment, it will save you a great deal of time and money down the road.

If you have missed the opportunity of preventing the account from being sent to a collection agency, it is important to know that all medical collections, regardless of how much you owe, are created equal. Whether you pay off a $20 collection or a $2,000 collection, you are still going to gain the same amount of points back once it is paid in full. That being said, pay off the lowest hanging fruit first.

More often than not, our clients have entered our program to restore their credit in order to qualify for a mortgage loan. One important detail you should know about medical collections when it comes to getting financed for a home is that you are allowed to have up to $2,000 in medical collections at closing. While this factor doesn’t improve your credit, it is still good to know when it comes to the underwriting process.

Another fact that isn’t as widely known is that in the recent years, medical collections have been given less weight when it comes to impacting your credit score. This conclusion was drawn when it was taken into consideration that while missing payments on credit cards, auto loans, utilities is something that can be foreseen, medical dilemmas are typically unpredictable and a missed payment is more or less out of the control of the consumer.

As with any collection account, medical collections vary a great deal in the amount, last activity, which bureaus are being reported, and many other variables. If you are not sure on how to proceed, it is best to contact a professional that can get you headed in the right direction. Often times, people will take action to get items removed from their credit either by disputing or paying their debts off. It is important to remember that there is a science behind how your score is generated and without understanding how that works, you could be doing more harm that good. Tru Path Credit can help you plan the best course of action for your unique situation.