How Do Late Medical Bills Affect Credit Scores?
REM # F615
By Ilyce R. Glink
Summary: How will being late on my medical bills affect my credit score? Ilyce Glink provides some personal finance advice to a reader concerning medical bills that have gone out to a collection agency and how that will affect credit history.
Q: Could you give me an estimate on how many points are deducted from a credit report for a collection account? Is a medical collection account handled differently than a regular collection account? Thank you.
A: According to myFICO.com, which is a partnership between Equifax (a major credit reporting bureau) and Fair Isaacs (the company that created credit scores) there are five major categories that contribute to your total credit score.
Your payment history accounts for 35 percent of your score. How much you owe accounts for 30 percent. The length of time you have had credit is worth 15 percent of your score. New credit (the number of recently opened cards and the number of inquiries to your account) accounts for another 10 percent of the score, and the types of credit used (mortgage, credit cards, etc.) accounts for the final 10 percent.
If you have a bill that's gone to collection -- whatever kind of collection doesn't really matter. That falls under the "payment history" portion of your credit score, and that's the biggest contributing factor to your overall score. Paying late, or failing to pay and having a bill go to a collection company, will severely reduce your credit score.
I can't tell you how much of a hit your credit score will take because other categories are affected. If you have a bill that's in collection, it probably has an impact on the "amounts owed" category, which looks at how much you owe, how many lines of credit carry balances, and how much debt is on installment plans.
You should go to myFICO.com and pull a copy of your credit report and score. For $12.95, the site will also give you detailed instructions on how you can raise your own score.
NOTE: This column is distributed by Real Estate Matters Syndicate, PO Box 366, Glencoe, Illinois, 60022. This column may not be resold, reprinted, resyndicated or redistributed without written permission from the publisher.
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