In June I was diagnosed with osteomyelitis, which is a bone infection. I became very ill and almost died. Because of this, I was unable to make payments to my credit card companies. On top of it all, my husband also lost several thousand dollars at work to take care of me. How can I get my score back after all these late fees and delinquencies on all my credit cards?
Sick and Tired
Dear Sick and Tired,
I’m so sorry to hear about your illness. It sounds like you might be on the mend. I hope you keep getting better.
Getting a serious illness can be devastating for a few reasons. Not only does your health suffer, but so can your finances. And your credit score along with it. As you’ve already seen, having unpaid bills means that your credit score takes a major hit. But there’s good news—it’s possible to get your score back up.
First things first: try to catch up on your payments. Your payment history, or the record of whether you’ve paid your bills on time or not, makes up for 35% of your credit score. If you’re having problems paying the bills, try reaching out to the lender and letting them know. They might have some programs for your situation.
Some lenders have programs that allow you to convert your credit card balance into a personal loan. This might reduce your monthly payments, depending on the length of the term, and help you get back on track.
Plus, some hospitals and doctor’s offices might have in-house financing options. They could create a repayment plan, if you’re struggling to pay your medical debt. If you’re dealing with a medical debt collector, it’s worth trying to negotiate with them. It’s also worth noting that the three major credit bureaus have a 180-day waiting period before medical debt appears on your credit reports.
Either way, it’s definitely worth reaching out to the lenders who received late payments. They might be able to work with you on the items that were reported late. Some lenders do this in good faith, if you’ve been a good customer and typically have made on-time payments. You could reach out to them in writing, also known as a goodwill letter. Explain why your payments were missed and why they should be removed from your credit report.
Don’t forget that the lender doesn’t have to honor your request. So make sure to be polite in your letter. You’ll probably need to follow up with your lender, so be persistent. If they don’t want to change a late payment on your credit report, they could waive a late fee. It never hurts to ask!
If you feel like you’re drowning in medical debt, you do have other options. It might be worth looking into whether you qualify for Medicaid. It can cover your medical bills retroactively. Whether or not you qualify is determined at state level. There are also organizations, such as Patient Advocate, that offer co-pay relief and other financial aid options.
Two other great options are balance transfer cards or a debt consolidation loan. Some balance transfer cards offer introductory balance transfer rates of 0% for several months—often 12 to 24 months.
So what does that exactly mean for you? Well, you can transfer existing credit card debt to a completely new card, avoiding paying interest on your balance for the time that allows 0% introductory balance transfer rates. Balance transfer cards can come in handy, but they can also put in a tight spot if you’re not careful.
Debt consolidation loans, on the other hand, is a new personal loan that allows you to pay off all your debts. It’ll make one payment to the new lender going forward. And instead of charging variable rates like credit cards, personal loans often only charge simple interest. This is a great option that’ll help keep your credit utilization on the lower side, which could bump up your credit score.
Speaking of your credit utilization rate—try to keep it as low as possible. Your credit utilization ratio is the ratio of your debt to your combined credit limits. Generally, you want to keep your credit utilization below 30%. Let’s say you have a credit card limit of $5,000. You want to use only $1,500, which is 30%, of that limit. This is a good option when you’ve paid off all your debts.
Let’s say you do manage to pay off a credit card in the next few months. Try to keep it open after it’s paid off. Your length of credit history accounts for 15% of your credits core. Are you tempted to use your card? Just cut it up or ask the lender to put a freeze on the card.
If you feel like you’re in an impossible situation, I get it. Getting hit with a serious illness and medical billsanda dropping credit score, all in one fell swoop, can be overwhelming. But things can get better. Work towards paying your bills, keep an eye on your credit utilization rate and give it some time.