BACK

Matt About Money

Getting rid of old medical debt

Summary

When old medical debt is keeping you from moving ahead with your life, it’s time to take action. Either pay it off or work out a debt settlement with collectors

The editorial content below is based solely on the objective assessment of our writers and is not driven by advertising dollars. However, we may receive compensation when you click on links to products from our partners. Learn more about our advertising policy.

The content on this page is accurate as of the posting date; however, some of the offers mentioned may have expired. Please see the bank’s website for the most current version of card offers; and please review our list of best credit cards, or use our CardMatch™ tool to find cards matched to your needs.

 

Question for the CreditCards.com expertDear Opening Credits,
Last year I had to go to the emergency room. If you can believe it, the total cost for one day was almost $3,900. I did not have insurance at the time. No job because I was a senior at San Diego State finishing up my degree. I graduated and I’m working, but living with friends. I need good credit to rent a place, but I know all this is on there. I need a credit card, too, but I tried and was turned away. I don’t want to keep doing that to further ruin my credit. What now? I have no parents to turn to and can’t live here forever. — Ella 

Answer for the CreditCards.com expertDear Ella,
Sadly, I can believe that your brief visit to the ER totaled nearly $4,000. If you really want to be sick, get hold of your original itemized bill. I’ll never forget being charged $300 for a bag of saline when I went in for the flu. Unfortunately, such prices are the norm. With or without medical insurance, the costs can really stack up.

Soon after being treated, I’m sure the provider attempted to get you to pay by sending bills and calling you on the phone. How I wish you could go back in time to negotiate with them! You’d be in a much better position today.

Many doctors and hospitals are willing to accept less than the full amount, especially from people without coverage. It would have protected your credit reports and scores, too. Hospitals and doctors don’t report to the consumer credit reporting bureaus (Experian, Equifax and TransUnion) unless they charge an account off and sell it to a collection agency. Most collectors do report, so it’s highly likely that the bad debts are showing up and hurting your credit rating.

All is not lost, though. You can overcome these problems!

Many landlords check the credit reports of prospective tenants, so add a statement to your credit report file that explains why you owe collection agencies. This is your right under the Fair Credit Reporting Act. In 100 words or fewer, summarize what happened. Attach it by using the online system on each credit bureau’s website or call them for assistance. To help you draft that statement, read “How to add a 100-word written statement to your credit report.”

The statement won’t help with your credit scores, as the collection activity is being factored in, but an individual looking at your credit report will see it and could be sympathetic to your plight. You and I are hardly the only ones to be socked with stratospheric medical bills. Many adults can share a similar horror story.

Another positive is that you have a job. A steady income and enough cash for a couple of months’ rent plus a security deposit can supersede your type of credit troubles. If not, you’ll have to either continue to live in your current situation or find someone else to live with for a while until things get straightened out.

Getting a credit card may be bit more challenging than a place to live, as lenders do analyze credit scores and probably won’t pay attention to your reasons for default. Because the collection accounts are still fresh and the amount owed is not insignificant, you appear to be a potentially risky cardholder. After you situate yourself in a home, I strongly suggest saving up some money to pay the debt off. If you pay what you owe completely, your credit reports and scores will improve radically. You can also attempt a settlement (paying less than you owe), which doesn’t rate as highly, but it’s still better than an outstanding collection account.

To settle your debt, you will need to find out who currently owns it. That information can be found on your credit report. You can pull your credit reports for free once a year from each of the big three credit bureaus at AnnualCreditReport.com. Once you contact the collection agency, do not offer to pay more than you can truly afford, which can only get you in deeper trouble if you can’t meet your other bills. And do not send any money in until you get your agreement in writing from the collector. To find out more about how the debt settlement process works, the article, “What lump sum offers will collectors settle for?” will explain it in more detail.

Once you’ve dealt with the debt, try for another credit card. You’re right in that numerous rejected applications will negatively affect your score, especially if you have no good activity being reported to offset it, so go easy. Start with a secured credit card, which requires cash collateral, then work your way up to an unsecured account.

I see a healthy financial future for you, Ella. You can do this.

See related:Credit card video: The basics of debt settlementDon’t settle a debt for more than you can pay

 

What’s up next?

In Matt About Money

Fiancee leaves ex with big pre-wedding debts

He gave her his credit card to buy a $3,600 dress and financed a $9,000 ring. Then she left the country, taking it all with her. What’s a jilted lover to do?

Published: October 2, 2013

See more stories
Credit Card Rate Report Updated: August 21st, 2019
Business
15.55%
Airline
17.49%
Cash Back
17.63%
Reward
17.49%
Student
17.69%

Questions or comments?

Contact us

Editorial corrections policies

Learn more

Join the Discussion

We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company’s business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.