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Medical debt can damage credit scores

South Carolina families experiencing medical debt may want to pay attention to a recent article making headlines. Paying these types of bills can be extremely confusing, especially with insurance and figuring out whom has to pay. These days, medical debt is quickly being turned over to collection agencies and has the potential to be a nasty surprise for someone who may find out later that their credit report is negatively affected by an unpaid medical bill.

In the past, relatively little revenue came from patients paying medical bills, only about 8 percent or less. Now the number stands at 20 or 30 percent, explaining why more medical debt is showing up on credit reports sooner. In the year 2010, it is estimated that about 9.2 million people in the age groups of 19 to 64 were called by collection agencies due to a medical billing error. About 30 million were called because a medical bill was unpaid.

Many people are unaware that they have medical debts on their credit reports, potentially leading to unfortunate surprises when people try to refinance their homes or make large purchases using credit. Sometimes medical debt can affect a credit score by over 100 points, causing consumers to have to pay more before they can obtain lower interest rates. Because so many people were unaware of the potentially damaging information on their credit reports, and the low likelihood someone would allow their credit to be damaged because of a small bill, a bill was introduced in Congress similar to the Medical Debt Responsibility Act.

The current act erases medical debt off of credit reports within a period of 45 days after it has either been settled or paid in full. The newly introduced version of the bill could potentially erase debts no larger than $2,500. While this will not help everyone, it could help South Carolina families struggling to pay off medical bills or those who may have credit problems because of the debt.

Source: The New York Times, "Discrepancies on Medical Bills Can Leave a Credit Stain," Tara Siegel Bernard, May 4, 2012

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