When it comes to managing medical expenses, seniors often face significant financial challenges. Since retirement usually means living off of a fixed income, dealing with medical bills not covered by insurance can easily put seniors at risk of landing in debt.
According to the Consumer Financial Protection Bureau, nearly a third of American consumers have debt that’s been turned over to collections, with over half of that from medical bills. Even having a comprehensive retirement plan doesn’t guarantee that you’ll be able to avoid unforeseen (and expensive) health problems.
Thankfully, there are strategies to handle daunting medical debt and to prevent debt incurred from hurting your credit. This detailed guide offers helpful information and advice for navigating healthcare costs as a senior and dealing with medical bills and debt that can harm your credit score. Read on to learn more, or click through the menu below to find the information you need.
How to Budget for Senior Healthcare Costs
How to Choose the Right Medical Insurance Option
How to Pay Medical Bills
How to Maximize Deductible Medical Expenses
How to Minimize the Negative Effects of Debt on Credit
How to budget for senior healthcare costs
Why budgeting for medical costs matters
According to the Bureau of Labor Statistics, an average of $6,833 a year is spent on healthcare in households led by an individual who is 65 years or older. Underestimating potential medical expenses in retirement is the main mistake that leads to credit-damaging debt and the need for credit repair. The snowball effect of medical expenses is a large part of the reason why they’re important to keep under control as a senior.
Delaying healthcare bills without a plan and ignoring medical debt are surefire ways to cause financial distress, especially when you’re 65+ years old. Creating a budget for healthcare costs is the first step to minimizing the shock of medical expenses that can lead to crippling debt and a ruined credit score. There are plenty of steps you can take to keep your medical expenses under control before you have to negotiate with debt collectors and utilize credit repair software.
What to know when budgeting for senior healthcare
When it comes to routine healthcare expenses, seniors should take into account insurance premiums, out-of-pocket costs and possible expenses associated with paid long-term care. Developing the right medical budget as a senior doesn’t have to be a grueling task.
The key is to be realistic about the different types of costs you need to prepare for and being proactive about asking for help when needed. Account for everything (income, debt, benefits, etc.) and document every financial move so there is a paper trail that eliminates second-guessing and family conflicts.
Navigating the details of health insurance, medical bills, prescription costs and more can be overwhelming for anyone. As a senior preparing for your financial future, it’s wise to involve a trusted advocate who understands your situation and can help you make important decisions regarding medical expenses.
You may choose to give authority to trusted family members who are helping you, and remember you can still oversee all account activity. It’s recommended that you communicate often with your family about your finances and look into professional financial consulting and/or the need for a Power of Attorney.
How to choose the right medical insurance option
The best practices for deciding between the various insurance options as a senior aren’t always obvious. The average American Medicare beneficiary still spent well over $5,000 out-of-pocket per year for medical expenses according to one Kaiser Family Foundation study from 2019. How can you choose the coverage option that is the least likely to land you in debt?
When it comes to covering medical expenses, seniors in the United States have some options, including:
Medicare: The federal health insurance program for 65+ individuals who have worked full-time for at least 10 years.
Medicaid: The health insurance program run by states and partially funded by the federal government to help low-income families and individuals.
Private insurance: Insurance not federally or state run—it can be purchased from either your employer, a state or federal marketplace or a private marketplace.
What to know about the cost of Medicare
To understand what expenses you need to cover yourself as a senior, it helps to know your two coverage options under Medicare, the most popular type of insurance for 65+ individuals.
There is original Medicare, which consists of parts A and B. Medicare part C, which is also known as Medicare Advantage plans, is offered by a private company that has a contract with Medicare.
Parts A and B of Medicare include:
Skilled nursing facility care
Prescription drugs (limited)
Medical supplies and equipment
Part C includes all of the following in addition to parts A and B:
Special needs plans
Private fee-for-service plans
Preferred provider organizations
Health maintenance organizations
Medicare medical savings account plans
While Medicare covers a substantial amount, there are still quite a few common services among retirees that are not covered, including:
Most dental care
Routine foot care
Hearing aids and fitting exams
Eye exams related to prescription glasses
Ultimately, what seniors 65 and over will spend on healthcare each year will differ depending on age, gender and health status. Although there are countless scenarios that could increase or decrease an individual senior’s healthcare spending, the general trend remains that their healthcare costs are much greater than their younger counterparts.
There are plenty of resources available for seniors looking for assistance in understanding the best insurance coverage for their situation. It’s important to keep in mind that senior advocacy centers offer helpful services when you aren’t sure how to make the best decision.
How to pay medical bills
When dealing with medical bills not covered by insurance, there are a few steps you can take to make sure you aren’t overcharged and to prioritize your payments. By following the steps below, you’ll prevent a bill from winding up in collections, which can ultimately hurt your credit score.
1) Don’t pay until you fully verify the bill
Sometimes the way that medical services are billed is confusing. Don’t rush to pay a bill before you thoroughly check it for errors. Educate yourself on how to identify and address the most common medical billing mistakes to save yourself headaches in the future.
2) Make sure insurance was applied to the bill
Ask for an itemized bill from your provider to make sure your bill is adjusted. If you don’t see an insurance payment or discount reflected on the bill, there is probably a mistake. Also, it’s helpful to have a second set of eyes to catch inaccuracies.
3) Check that the explanation of benefits matches the bill
Expect an Explanation of Benefits (EOB) document to arrive at about the same time as the corresponding medical bill. Confirm that there aren’t any discrepancies to avoid being overcharged.
4) Follow up and negotiate until an issue is resolved
A large component of ensuring you’re paying the right amount for your medical bills is persistence. Don’t shy away from calling your healthcare provider and your insurance company multiple times to clarify or negotiate, and record the names of the individuals you’re speaking with and the time. Your wallet will thank you.
5) Request a payment plan
If you can’t tackle medical bills in full, there are often opportunities for interest-free payment plans if you simply ask.
If you’ve done everything in your power to reduce and spread out the cost of medical bills and you’re still struggling, it’s time to ask for support. Reach out to trusted family members or consider enlisting the help of medical billing advocates.
If your medical debt has already been sent to a collection agency, don’t report the bill to credit agencies right away. You may be able to protect your credit score if you’re able to resolve your bill quickly, and it might not even appear on your credit report.
Take a look at the resources below to learn more about how to best manage your insurance costs when you’re 65+:
How to maximize deductible medical expenses
When you’re a senior, it’s important to understand best practices for advocating for yourself to get as much money back on medical expenses via tax deductions as possible. Seniors can benefit from deductible medical expenses that can help them avoid detrimental debt.
If you itemize your deductions, medical and dental expenses are deductible from your income taxes on Schedule A of your tax return as a senior. The limit is 7.5 percent of a taxpayer’s adjusted gross income (AGI) for 2019 and 2020—only expenses that exceed 7.5 percent of a taxpayer’s AGI are deductible.
For example, if someone’s AGI is $50,000, only medical and dental expenses above $3,750 (7.5% x $50,000 = $3,750) would be deductible.
Premiums for health insurance and qualified long-term care insurance
Medical fees from doctors, laboratories, dentists, assisted living residences, home healthcare and hospitals
Cost of transportation to receive medical care, including ambulance service
Home modifications costs, such as wheelchair ramps, porch lifts, grab bars and handrails
Entrance fees for assisted living
Room and board for assisted living if the resident is certified chronically ill by a healthcare professional and is following a prescribed plan of care
Personal care items, such as disposable briefs, and foods/nutritional supplements for a special diet, as prescribed by a doctor to treat a medical condition
Cost of prescription drugs
Expenses not eligible for deduction
Medical expenses that are reimbursed by health insurance, Medicare or any other program
Payments or distributions out of health savings accounts
Life insurance premiums
Non-medical care to enable the tax filer to be gainfully employed
Although deductible medical expenses shouldn’t be relied on as a primary source of funds for senior healthcare, they can still help cover the cost of care and limit potential debt. A reduced tax burden from medical and dental tax deductions can help retirees reallocate their resources where they matter the most.
Along with other strategies to lower your overall healthcare tab, these deductions might help make the difference in being able to afford home care without going into debt, which can hurt your credit.
Be cognizant of the fact that deductible medical expenses should not be confused with Dependent Care Tax Credit—which is meant for dependent care expenses the primary taxpayer incurs to enable them to work, or look for work, rather than caring for their dependent.
How to minimize the negative effects of debt on credit
Not only can seniors’ credit scores suffer the damage of debt, but their health can be compromised by delaying medical care they need. According to one Consumer Reports survey, 41 percent of people said they put off a doctor’s visit because of cost.
It’s important for seniors to realize that not only are there medical debt forgiveness programs, like RIP Medical Debt, but there are also several encouraging changes occurring.
Here are three main ways seniors can reduce the impact of medical debt on their credit:
1) Finalize payment arrangements right away
Start asking about payment arrangements as soon as you receive medical bills you know you can’t cover. Being proactive to figure out if your provider can give you a payment schedule option will help you minimize the detrimental effects or discount portions of your bill if you pay in advance.
2) Request to make monthly payments on medical bills
As long as you have documented proof that your healthcare provider or collector has agreed to this payment plan, you could buy yourself time by asking to make monthly payments. If they report a negative item on your credit report, you can dispute it by showing they agreed to the payments you’re making.
3) Avoid paying medical debt with credit cards
Think twice before paying for a huge bill with your credit card. Keep in mind that you lose new protections offered by credit scoring companies if you pay your medical costs with a credit card and then can’t pay off the credit card. This type of credit card debt from medical expenses will be treated like any other debt. As a result, it will hurt your payment history and your credit utilization ratio regardless.
High healthcare costs coupled with a relatively low fixed income could lead to seniors getting into debt and struggling with credit. Even if medical bills compromise your progress, there are plenty of ways to get back on the right track to reach your financial goals in retirement.
Whether you ask a family member for help or consider using a professional service, prioritizing your financial well-being pays off in the end. If you’re concerned about your credit health while handling medical expenses, reach out to the credit consultants at Lexington Law. Our team can help you learn more about your credit report and strategize ways to improve your credit.
Everyone makes mistakes, and sometimes the entity making the error is your credit card company. Luckily, you’re protected by the Fair Credit Billing Act (FCBA), which provides, in part, some processes by which consumers can dispute a credit card charge. The FCBA also requires that the credit card company investigate the matter when requested. If the card company finds it made an error on your statement, it must correct it.
Sometimes, the retailer or other merchant processing the charge actually makes the error. Examples can include accidental double charges, being charged the wrong amount or having someone make fraudulent charges on your card. In these cases, the credit card company has the ability to issue a chargeback. That just means the charge is reversed, and the merchant in question returns the money that was paid to them.
For a chargeback or any other type of remedy to occur, you typically have to dispute a charge on your card. Find out more about credit card disputes below.
When can you dispute a credit card charge?
There are three reasons you can legally dispute a charge on your credit card so you aren’t ultimately responsible for it.
When someone uses your card without your permission
This doesn’t mean that someone authorized on your card, such as a spouse, bought something you didn’t agree with. That’s a problem you have to work out with the person in question.
Instead, this refers to people fraudulently using your card or credit card number. It might mean someone you know—who is not an authorized user—taking the card without your knowledge and making purchases. It could also refer to a stranger stealing your card and using it or someone stealing only the credit card number and making purchases online.
When there is a billing error
Examples of this can include your electric company processing a double payment in error or your cable company billing you for a higher-value package than you actually have. In these cases, you may want to contact the company first because most are more than willing to reverse the charges themselves and save everyone the time involved in a credit card dispute investigation.
But if that’s not the case or you can’t or don’t want to involve the company for any reason, your credit card issuer can typically help.
When the merchant won’t help you resolve an issue with the purchase
If you make a purchase that doesn’t live up to the understood agreement, you may want to return the purchase. If the merchant won’t help, you may be able to file a credit card dispute. Note that this is meant for issues such as a damaged or incorrect product and not as a way to recover from buyer’s remorse.
For example, if you order size 10 shoes and get size 8, but the merchant refuses to accept a return, you may have a case for a dispute. But if you simply order a pair of shoes, get exactly what you ordered and decide you didn’t want to spend that much after all, a dispute may not be the ideal path to a resolution.
Try to avoid friendly fraud
Friendly fraud occurs when someone tries to use the credit card dispute process to force a chargeback on legitimate charges. The above example of wanting to return shoes because you decided you didn’t want them after all could be an example of friendly fraud if you force a chargeback over it.
Friendly fraud also refers to filing a credit card dispute for a chargeback simply because you think it’s easier than going to the retailer for a refund. But retailers lose more money to chargebacks due to chargeback fees, the fact that they don’t get their merchandise back and the labor time associated with handling the dispute and chargeback.
These losses can hurt all types of business but can be especially harmful for small or new businesses. And if you abuse dispute systems in this way, you can actually be blacklisted by companies who will not accept your method of payment anymore. That’s true even if you didn’t mean any harm in filing disputes of this nature.
How to dispute a charge
But if you have a legitimate, legal reason to dispute credit card charges, you should. Follow the steps below for doing so.
Gather documentation that illustrates the charge was in error, if possible.
Make a good-faith effort to resolve issues with the merchant first. This can include calling or going to the store and talking to someone in customer service or billing. Let them know the issue and give them a chance to handle it.
Take steps to protect yourself if you believe fraud has occurred. That includes changing passwords, notifying your credit card company and putting a freeze on your credit report.
Contact your card issuer by mail, phone or online to file a dispute. Mail is the best method because it’s covered by the FCBA and creates a paper trail. But the other methods can also work.
Once you do write the letter, make sure you send it to the right address. Don’t send it to the address you mail payments to. Look at your statement or check online to find out the address for your creditor’s billing inquiries department.
How long do you have to file a dispute?
Under the FCBA, you have 60 days to file a billing dispute. That’s 60 days from the date when the original bill or statement with the inaccuracy was mailed to you, which means by the time you see the statement, you may have less than 60 days. Mailing your dispute letter certified mail with return receipt requested can be a good idea if you want to document that you met this deadline.
Look out for your credit throughout the dispute process
Throughout the process of handling your credit card dispute, make sure you’re keeping your overall credit in mind. This is especially true if you were the victim of identity theft. In such a case, there’s a good chance that you might have other issues to deal with. Sometimes bringing in help, such as working with a credit repair firm such as Lexington Law, can help you deal with multiple issues on your credit report.
And even if you’re only dealing with the one billing issue, make sure you follow up. Ensure that in the time it takes to deal with the issue, the credit card company doesn’t mark you as missing a payment or report a missed payment to the credit bureau. If that does happen, you may need to write a separate credit dispute letter to the bureau requesting that the negative item be removed.
Reviewed by Kenton Arbon, an Associate Attorney at Lexington Law Firm. Written by Lexington Law.
Kenton Arbon is an Associate Attorney in the Arizona office. Mr. Arbon was born in Bakersfield, California, and grew up in the Northwest. He earned his B.A. in Business Administration, Human Resources Management, while working as an Oregon State Trooper. His interest in the law lead him to relocate to Arizona, attend law school, and graduate from Arizona State College of Law in 2017. Since graduating from law school, Mr. Arbon has worked in multiple compliance domains including anti-money laundering, Medicare Part D, contracts, and debt negotiation. Mr. Arbon is licensed to practice law in Arizona. He is located in the Phoenix office.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
The topic of credit repair is a broad one, and while it mostly focuses on recovering from past mistakes, it can also encompass credit creation.
Consumers who are new to the credit realm are often tagged with the term “unscorable” because the credit bureaus do not have enough information to create a credit file in their name. For example, an unscorable consumer usually falls into all of the following categories:
A new adult or American citizen with no credit experience
No credit cards
No bank account
No mortgage or auto loan
No personal (or reported) rental, utility, or cable accounts
Even those with previous credit histories can fall off the map if they close all accounts and fail to use credit for more than six months. There are a few things you can do to build your credit file and establish a positive score:
Order your credit reports. It’s impossible to know your credit status without contacting the credit bureaus. Every consumer is entitled to free annual copies of their TransUnion, Experian and Equifax credit reports via AnnualCreditRepair.com. Order yours to see where you stand.
Assess your accounts. The average consumer isn’t getting the full benefit of “alternative” credit data, also known as unreported data. For example, suppose you rent an apartment, have cell phone service and a cable package, and yet, none of these accounts appear on your credit reports. In general, these types of lenders fail to report histories to the bureaus unless a problem exists, costing you credit score points in the process. Contact your lenders directly to learn more about their policies. A simple request to report could lead to fast and easy credit creation.
Open a credit account. The concept of credit can be overwhelming without the right perspective. Rather than viewing credit and debt together, consider using credit as a tool to help you create a positive future. Start slow by opening one of the following accounts:
A secured credit card. Consumers with no credit history may find it difficult to get approved for a standard line of credit. Consider applying for a secured credit card first. This type of card requires pre-loading funds before use like a debit card, however, your activity is reported to the bureaus like a regular credit account. Steady use will also allow you to convert the card to standard credit after a period of six months to a year.
Personal loan (with a cosigner). Applying for a small personal loan, e.g., a line of credit at the local bank or a federal student loan can help you establish credit with necessary funds and a manageable repayment schedule. Ask a close family member to act as your cosigner and remember that your actions affect their credit health as well. Pay your bill in full and on time to avoid taking advantage of their generosity.
Remember the Five Factors. Losing the “unscorable” label takes time, and it’s important to establish healthy habits from the very beginning. Click here to review the Five Factors that determine how your credit is calculated. Understanding the facts is your first priority.
The bottom line: A world of opportunity waits for those who take the right steps. Begin your journey with knowledge and planning; the result will help you achieve the credit score you deserve.
Credit scores naturally fluctuate from month to month depending on your usage, payments and transactions. For the most part, your credit score is directly tied to your actions. Occasionally there will be errors on your report that were out of your control, such as with hard inquiries and lines of credit. If you notice a sudden decline in your credit score, even if only by a few points, you may be suffering from the effect of an unwarranted credit inquiry.
Credit inquiries occur when a lender requests your full credit history from one of the credit reporting agencies. These inquiries into your credit history can affect your credit score negatively and will typically stay on your report for up to two years.
Inquiries stay on your record for so long because they reflect how many times you have applied for credit. Lenders use how many times you have applied for credit to judge whether you should be approved for an extension of credit.
In certain circumstances, an unapproved inquiry can be removed from your credit report by sending a credit inquiry removal letter to the credit reporting agency or by disputing it online.
The difference between hard and soft inquiries
Although there is no difference between the data provided in a hard and soft inquiry, they do not affect your credit the same way. A common misconception is that checking your own credit history will negatively affect your score, but this is not true. When you check your own credit history, it is considered a soft inquiry and will not show on your credit report or affect your score.
Hard inquiries, by contrast, occur when a lender pulls your credit report. A lender may pull your credit history while going through an application for a new loan, a new credit card or any line of credit. Additionally, banks and property managers may pull your credit while setting up accounts or determining approval for an apartment.
Occasionally, a hard credit report can sometimes be pulled without your knowledge, approval or without your full understanding. Hard inquiries that were pulled without your request can be removed from your credit report under the Fair Credit Reporting Act.
How do credit inquiries affect your credit score?
Hard inquiries count as minor negative entries and account for 10 percent of your credit score. Although the exact effect on your credit score will vary depending on your credit history and current standing, you can typically expect to see a one to five point drop in your overall credit score.
Although the exact hit to your credit score will vary, you can expect to see drops in your score when these inquiries start to add up. Occasionally lenders will either pull your credit by mistake, pull your credit multiple times or pull your credit without your knowledge whatsoever.
Can you remove inquiries from your credit report?
Hard inquiries can be removed from your credit history if they occurred without your approval. If you did not have knowledge of the hard inquiries pulled from your credit profile, you have the right to ask for the inquiry to be removed.
You can remove a hard inquiry if:
The inquiry occurred without your knowledge.
The inquiry occurred without your approval.
The number of inquiries exceeded what you expected.
How to send a credit inquiry removal letter
To send a credit inquiry removal letter, you should contact any credit reporting agency that is reporting the inquiry. Credit inquiry removal letters can be sent to both the credit reporting agencies and the lender who issued the credit inquiry.
1. Send the credit inquiry removal letter via certified mail Certified mail is a way in which the sending and receiving of a letter or package is recorded. This form of mail will give you proof that the credit issuer or lender received the proper first notification to remove the hard inquiry.
2. Notify the lender first Notifying the lender before you send a removal notice is necessary if you plan to take the dispute further to court. This is the proper first step for removing hard inquiries.
3. Include a copy of your credit report Including a copy of your credit report with the highlighted unapproved hard inquiries may help with referencing your case. Although the credit reporting agencies will have easy access to your report, a hard copy will help investigators when processing your request.
4. Send to the appropriate credit bureau It is important to send your letter to the credit bureau with a record of the hard inquiry you want removed. Below are the addresses for each bureau:
Date Your name Your street number, street name City, state, zip code Your phone number Social Security Number Name of credit bureau
Re: Reporting Unauthorized Credit Inquiry
To whom this may concern,
I am writing to request the removal of unauthorized credit inquiry/inquiries on my (name of the credit bureau—Equifax, Experian and/or TransUnion) credit report. My latest credit report shows (number of hard inquiries you are disputing) credit inquiry/inquiries that I did not authorize.
I am writing to dispute the following inquiries and ask for their removal from my credit report.
Please have these/this unapproved inquiries/inquiry removed from my credit report within 30 days, as it is harming my ability to obtain new credit. I would appreciate a copy of my credit report once this issue is resolved.
Thank you for your assistance.
How to stay on top of negative credit report entries
Removing questionable negative items from your credit profile can be a long and time-consuming process that can seem daunting. Although a few points’ difference may not seem like a large priority, it is important to stay on top of these entries before they add up and get out of control.
If keeping your credit score high or improving your credit score is a top priority, Lexington Law Firm may be a good option for you. Lexington’s credit repair services can help you with addressing questionable negative items on your credit report as you work on improving your credit.
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