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Common myths about medical debt

From time to time it is necessary to clear up confusion regarding our rights regarding debt collection, credit reporting and billing procedures for medical bills.

Myth: As long as I am making payments on a medical bill, it can't be sent to collections.

Fact: Making payments won't necessarily keep the bill out of collections. Even if you are making regular payments, they need to be a certain amount to prevent being turned over. Of, if you are under a payment arrangement but are late (even by just a few days) your bill may go to collections. If you leave any balance unpaid, there's a good chance it will go to collections.

There are some consumer protections, but they vary from state to state. New protections under the Affordable Care Act give patients at non-profit hospitals time to apply for financial assistance before bills are turned over to collections.

Myth: I must be given notice before a medical bill goes to collections.

Fact: Most of the time consumers are given notice, but that's assuming they even know about the bill in the first place. Billing errors, lost mail, mail sent to the wrong address does happen. You may not even know about the unpaid medical bill until you get a call or letter from a collection agency.

Myth: When it comes to credit scoring, medical accounts are treated differently than other types of collections accounts.

Fact: The credit scoring formula does not distinguish between medical and non-medical collection accounts. All collection listings are derogatory and will affect your credit score the same way as other collections. Some creditors have been known to be more lenient when it comes to medical debt, even though the credit scoring formula will not.

Myth: I'll need to pay off medical collection accounts to improve my credit.

Fact: Paying your bills is the responsible thing to do, but don't do it expecting drastic changes to your credit score. Collection accounts damage your credit score, paid collections aren't as detrimental but they're still negative. The negative listing can stay on your credit file for up to 7 years.

While some collection agencies will agree not to report medical collection accounts that are paid off immediately, others refuse to do so. And some bill collectors will use the threat of credit report damage to try to get patients to pay up, even if the bill itself is disputed.