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The effect of medical debt on a credit report

Many people in South Carolina have overdue medical bills that they cannot afford to make payments on. In fact, almost half of all collection accounts in the U.S. are for unpaid medical bills, and one out of every six credit reports includes a medical debt collection. In 2012, unpaid medical bills resulted in 40 percent of Americans watching their credit score go down. While the leading credit reporting agency has changed its method of scoring medical debt, the problem still remains a considerable one.

When medical collections show up on a person's credit report, it can be harder to secure loans at reasonable interest rates. One unpaid medical bill that goes into collections can lower a person's credit score by up to 100 points. Individuals with higher credit scores generally suffer the most damage to their credit when a bill goes into collections.

The more time that passes after a bill goes into collections, the less of an impact the unpaid debt will have on a person's credit score. After seven years, unpaid items disappear from a person's FICO score. Collection items that are under $100 are in most cases not reported.

A person with overwhelming medical debt might want to speak with an attorney about solutions for avoiding aggressive collection measures. In some cases, filing for bankruptcy can provide an individual with the debt relief necessary to get a fresh financial start. An attorney may be able to help a person to determine which form of bankruptcy would work best for their situation and how to maximize exemptions while going through the bankruptcy process.

Source: Bankrate, "How will unpaid medical bills hurt credit?", Janna Herron, Oct. 15, 2013

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