Advice on Medical Bill

Managing medical debt in collections can be complex, but you’re asking the right questions to minimize the impact on your credit score. Let’s break this down step-by-step:

1. Understanding the Impact of Medical Debt on Your Credit Score

Medical collections are treated slightly differently from other types of debt on your credit report:
- As of July 2022, medical debts under $500 no longer appear on credit reports.
- Paid medical debts are removed from credit reports (a rule effective since April 2023). This means once you settle or pay the debt, it should no longer appear and could positively impact your score.
- New medical collections are not reported to credit bureaus for at least 12 months, giving you time to address the debt before it impacts your credit.

2. Should You Pay the Hospital Directly or the Collections Agency?

Once the debt is in collections, the hospital has likely sold or transferred it to the collections agency. In most cases:
- If you try to pay the hospital directly, they may redirect you to the collections agency.
- Paying the hospital directly without involving the collections agency might not ensure that the collection account is resolved or removed from your credit report.

Recommendation:

Work directly with the collections agency to settle the debt, as they control the reporting at this stage.

3. Will Settling for $1,100 Remove the Debt from Your Credit Report?

When you negotiate a settlement, confirm in writing that the collections agency will:
- Consider the debt “paid in full” upon receiving the $1,100.
- Remove the collection account from your credit report entirely. This is known as a pay-for-delete agreement.
- Not all agencies agree to remove the debt, but many will, especially for medical collections.

Key Steps:

Before paying, get the agreement in writing from the collections agency.
Once settled, monitor your credit report to ensure the account is removed. If it isn’t, you can dispute it with the credit bureaus using the written agreement as evidence.

4. Alternatives to Paying Collections Directly

If the collections agency refuses to agree to a pay-for-delete or removal:
- Contact the hospital and explain the situation. Ask if they’ll recall the debt from collections if you pay the balance directly. This is rare but worth trying.
- Some hospitals have financial assistance programs that may allow you to work out a payment plan directly with them, potentially removing the need to deal with collections.

5. Will Paying the Debt Increase Your Credit Score?

If the collection account is removed from your credit report, your score should recover. The exact amount of recovery depends on your overall credit profile.
If the account is marked as paid but not removed, it won’t impact your score as positively. Paid collections are viewed more favorably than unpaid ones, but they still indicate past financial difficulty.

6. Additional Tips

Monitor Your Credit Report: After settling or paying the debt, check your credit report regularly using free tools like AnnualCreditReport.com to confirm the account is removed.
Negotiate Payment Terms: If you can’t pay the $1,100 in a lump sum, ask the collections agency if they’ll accept a payment plan while still honoring the settlement amount and pay-for-delete agreement.

Conclusion

Paying the $1,100 settlement can resolve the debt, but confirm in writing that the collections agency will remove it from your credit report.
Contacting the hospital directly may not resolve the issue, as the debt is likely fully handled by the collections agency now.
Once the collection is removed, your credit score should improve, and you’ll have peace of mind knowing this issue is resolved.

This process requires diligence, but by ensuring clear communication and documentation, you can minimize the long-term impact on your credit.