Making wise health decisions has obvious benefits for your physical well-being, but staying healthy and keeping away from the doctor's office can also benefit your credit score. Expensive hospital bills often require additional medical financing, and, just like any other financing option, this can have a negative effect on your credit score if it's not handled properly. Here are the ways medical financing can impact your credit score and what you can do about it.
Being sick or injured and having medical bills doesn't affect your credit score on its own, but if you don't pay those bills and they get sent to a collection agency, you can expect your credit score to take a hit. Even worse, if an unpaid medical bill forces you to declare bankruptcy, your score could plummet significantly. Remember that negative information in your credit report can affect your score for seven years, but if your bills force you to declare bankruptcy, that will remain a factor in your report for ten years. Medical bills are considered to be a leading cause of bankruptcy so the danger is very real.
Medical billing is complicated and estimates of expenses can be very different from the final bill. When you get the invoice go over each item and look for overcharges and errors. Keep an eye out for services and procedures that you didn't actually receive and contact the medical billing department about anything you're uncertain about. Your bill may be negotiable so ask the service provider about cutting fees. They may also offer you a payment plan of their own so consider that option if you don't have the money to pay up front.
While many potential lenders will pull your credit score and base their decision solely on that, some will also pull your full credit report and look at the information contained within it when calculating your score. Some lenders will actually disregard medical debt if they see that it's a major factor in your low credit rating. The idea behind this is that unpaid medical bills don't necessarily change the likeliness that a borrower will be able to repay their credit. If you let your phone bill go to collections or are carrying massive debt from an out-of-control shopping spree, you can bet that will look bad in your credit report. But because medical bills don't necessarily reflect your credit habits as much as your health situation, they're not always weighted the same in the eyes of lenders. This doesn't mean that you should feel free to ignore your medical bills, but if you're lucky you may not be heavily penalized by them when pursuing a new line of credit.
Watch what you eat, get regular exercise, and take care of your teeth. This isn't just good health advice; it's also a sound financial strategy. The less often you find yourself in the doctor's office, the less impact your health is going to have on your financial situation. With credit scores and medicine, the same rule applies: an ounce of prevention is worth a pound of cure.