How Medical Debt Affects Your Credit

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The Crushing Effects Of Medical Debt

How pervasive is America’s medical debt problem? According to 2017 data from the credit bureau Experian, unpaid medical debt in America topped $127 billion. New data from Consumer Reports shows that almost 30% of insured Americans had unpaid medical debt turned over to collection agencies in the past two years. A 2013 analysis by NerdWallet Health found that unpaid medical bills were the number one cause of bankruptcies, surpassing unpaid mortgages or credit card debts.

Even if you aren’t driven into bankruptcy, unpaid medical debt will eventually show up on your credit report – resulting in a lower credit score that further degrades your financial health. The Consumer Reports survey found that nearly one in five Americans has suffered a credit score drop related to unpaid medical bills. You can check your credit score and read your credit report for free within minutes by

Raise Your Credit Score, And Pay Less For Insurance

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A poor credit score makes your financial life difficult in a number of ways. You receive poorer interest rates and terms on credit cards, it’s harder to qualify for mortgages, and, “When it comes time to get insurance, maybe your insurance premiums will be a little more expensive because you have a low credit score,” says Millennial Money Expert Stefanie O’Connell.

Why would credit affect your insurance premiums? Insurers have to determine the premiums you pay based on the collective risk factors for that particular field. Greg McBride, Chief Financial Officer of Bankrate.com, includes insurance companies in this assessment: “They’re looking for ways to evaluate your risk, and creditworthiness is one of those metrics.”

Insurance companies typically don’t use your credit score directly, but they may incorporate your credit score and other relevant aspects of your credit history into a credit-based insurance score – an analogue that focuses not just on the ability …