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Examining the effect of medical debt on a person's credit rating

Ohio residents may be interested in how medical debt affects a person's credit rating. One study examined the effect that this debt has on people who may otherwise be good credit risks.

When a person has an unexpected medical condition, the hospital bills that result can often put a huge financial burden on them. When they are unable to pay these medical debts, they might be handed off by the hospital to a collection agency. Reports indicate that over 50 percent of all debts that go into collections are the result of unpaid medical bills. In some cases, these collections are the result of hospital billing errors or the person being unaware that the debt even exists.

Once these debts end up on a person's credit report, they are not distinguished from other, more foreseeable debts like those from credit cards or unpaid utility bills. This, according to one study, leads to lenders underestimating the person's credit worthiness based solely on their credit rating. The consumers who had medical debt were also just as likely to pay back their other loans and debts than those with credit ratings 10 points higher. The study concluded that the ratings of those with medical debt could be off by as much as 22 points. This discrepancy could lead to higher interest rates and denial of credit when needed such as when purchasing a home or a car.

Dealing with unmanageable medical debt can be stressful, particularly when the condition makes the person unable to work. An attorney may be able to help by examining a person's financial condition and negotiating with the hospital or debt collectors. In some cases, the attorney may be able to help the person file for bankruptcy if necessary.

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

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