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Medical bills and credit scores

Medical debt can cause financial hardship as well as lower the credit scores of New Hampshire residents who are unable to pay back that medical debt. In some cases, those who otherwise pay their bills are penalized due to what could have been an error on the part of a hospital or insurance company.

Research has shown that those who have unpaid medical debt that went to collections have a credit score that is 10 points below where it should be. If a debtor decided to settle the obligation, that person should have a credit score as many as 22 points higher than it is. However, the credit models do not treat medical debt differently than other forms of debt. Some are pushing for a more precise model that takes into account the fact that medical debt is often unplanned and the cost of treatment is not always known.

A boost in a person's credit score could have many tangible impacts. First, it may allow borrowers to get a better interest rate on a loan or become eligible for a loan if the increase pushes them out of subprime status. It may also impact their ability to get better insurance rates and secure housing. Therefore, proponents of a more precise model believe that it is important because a credit score can have a profound impact on a person's life.

Those who are facing a large debt of any kind may wish to consult with a bankruptcy attorney as soon as possible to discuss their options. The attorney may be able to settle or otherwise resolve the debt issue, which may make filing for bankruptcy unnecessary. However, if it is necessary or advisable to do so, the attorney may be able to help guide a client through that process.

Source: MainStreet, "Why Does Being Unhealthy Ruin Your Credit Score?", Chris Metinko , July 07, 2014

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