When Medical Bills Pile Up Credit Scores Can Suffer

Ronda Barmoy was a community services manager with a high-five-figure income, insurance and savings for a rainy day. Then, mounting medical bills made money so tight she turned to credit cards just to survive.

Barmoy can no longer work, but spent several years managing different community-based services organizations. Her primary role was providing vocational guidance to disadvantaged people, many with health issues or disabilities.

In her 25-year career, she helped hundreds of people access programs and better their lives; however, when her own health problems began to take a toll on her finances, there was no program available to help her.

A Series of Unfortunate Events

In 2000, Barmoy’s son sustained a head injury, and while in recovery, contracted a rare disease. To care for her son, she stepped down from her $75,000-per-year job. And while her son got better, paying for his care without her previous income wiped out a good bit of her savings. Thankfully, Barmoy was well-positioned at this time, having a strong relationship with her credit union and a credit score around 750.


As of 2015, new rules about the reporting of medical debt help in situations like this. For example, now a 180-day waiting period exists before a debt can be added to a credit report. Additionally, debts have to be removed after an insurance company makes a payment.

A study by the Consumer Finance Protection Bureau (CFPB) found that consumers were being penalized heavily for medical debt. Announcing those findings, CFPB Director Richard Cordray said, “Getting sick or injured can put all sorts of burdens on a family, including unexpected medical costs. Those costs should not be compounded by overly penalizing a consumer’s credit score. Given the role that credit scores play in consumers’ lives, it’s important that they predict the creditworthiness of a consumer as precisely as possible.”

Unfortunately, these new rules were not around when Barmoy first reached out. However, thanks to her strong relationship with a local credit union, she was able to get a loan that helped her stay afloat. Then she was diagnosed with a degenerative spinal disease.

Debilitating Health Issues

In 2006, Barmoy developed rheumatoid arthritis, fibromyalgia and Mixed Connective Tissue Disease (MCTD). MCTD is an autoimmune disease in which the body starts to attack itself, causing joint pain, swelling and muscle inflammation. Walking can be difficult if not impossible some days, and the pain can be overwhelming.

For a year after [the surgery], I had memory problems and anxiety – serious medical complications that took away those money-making options

“It was eight years from the time my team of practitioners declared me ‘disabled’ and no longer able to work, until I was legally considered disabled by the ‘system.’ In the beginning, I had good credit. I could get loans, had credit cards, paid most of my bills on time, and had good relationships with several banks who felt I was a positive risk for loans. Then, I had no income. I was sick, broke and deep in debt – with more debt and bills pouring in – and no end in sight,” explains Barmoy.

“I stayed afloat with help from my parents. I was also able to tutor international graduate students from a local university while providing resume writing services.” Then, a required surgery resulted in a bad reaction to anesthesia.

“For a year after [the surgery], I had memory problems and anxiety – serious medical complications that took away those money-making options. I’ve not been able to resume working, and my chronic health issues continue to worsen.”

During this period, her family and friends helped manage her personal affairs. Collectively, they made sure her utility bills were paid and there was food in the cupboards. In a medical emergency like this, making sure bills are paid on time is paramount to preserving a good credit rating. According to the Consumer Financial Protection Bureau, paying bills on time, every time, is critical. Having a designated person to monitor this or placing your accounts on automatic payment can be the best way to ensure your bills are getting paid.

In Barmoy’s case, the utility bills were paid but her medical bills were thrown in cardboard boxes, ultimately filling a forgotten closet in her house. At this point, she had neither disability income nor any other income. “Due to illness, you cannot pay your bills and have accrued debt from before you had no income. Well, quickly, your financial nightmare turns into a crisis. Collection calls, letters … bills gather dust. What is there to do?”

Her credit score dipped below 400. Adding a statement to your credit report can help explain extraordinary circumstances like bills not getting paid, but even that only goes so far. “An automated credit report review will not take your statement into account at all,” says Virginia Sullivan, Director of Education for Bill.com. “But in the event of a manual review or a follow-up request, it makes sense to at least outline your case using this tool in case it finds a receptive audience.”

“Hospitals have assistance programs, but I didn’t qualify in the beginning as my last reported income was a high five figures,” says Barmoy. “After disability, at poverty level, I was still overqualified. So, the bills pile up, and your credit continues to slip down … and down … until you have no credit. I was too sick, too tired, too overwhelmed,” she says.

Rebuilding Credit, Slowly

She finally qualified for disability at the age of 50. She receives more assistance than most people because her father had encouraged her from an early age to pay extra into Social Security, but she just didn’t prepare for a catastrophe. “I was comfortable. I didn’t think it could happen to me,” says Barmoy. “I didn’t plan for a major catastrophe – small catastrophes were OK because I knew I could get a loan to consolidate.” If she could do it all over, she would plan to have enough liquid assets to cover five years’ worth of living expenses, at a minimum.

I will be able to rebuild slowly, very slowly, but my finances will never amount to what most people would like to enjoy

Today, Barmoy’s situation is more stable. She has been receiving disability for two years now. She uses her credit union’s automatic payment program so she knows her bills are paid on time, and she sticks to a strict budget. She pays exactly $139 – the sum left over after paying her most crucial bills and living expenses – on one debt each month. Because of her chronic illness, her financial situation may never be what it once was, but Barmoy is determined to stay current on her bills and maintain good financial relationships.

She has focused on rebuilding her credit rating through secured credit cards, and so far, her plan is working.

Her credit score is now above 500, and she recently qualified for a low-limit credit card. “I will be able to rebuild slowly, very slowly, but my finances will never amount to what most people would like to enjoy,” says Barmoy. “Just a backup as an emergency fund, and that is fine with me.”

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