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There you are, living your best life, when a sudden sharp abdominal pain hits. It sends you to the emergency room. Before you know it, what should be a routine procedure turns into a medical fluke, and your stay in the hospital is extended from one week to three months.
This is what happened to me a few years ago when an appendectomy turned into a much more serious medical emergency — one that left me in a coma, in the intensive care unit for a few months. And while the physical and emotional strain I experienced was tough, the financial burden I was met with after my hospital stay was a uniquely difficult obstacle to tackle. I came home to unpaid credit card bills, late fees and a credit score that had plummeted.
The possibility of an unexpected hospital stay has become an all-too-familiar fear over the past two years for many. And during a medical emergency — whether COVID-related or something else entirely — one of the last things on your mind tends to be managing your bills or, in my case, paying off a credit card. But unpaid card payments add up quickly and can really hurt your credit score.
Here’s what to expect if you ever find yourself in a similar situation, what I did (or rather, didn’t do) to try to fix my plunged score, and what I would have done differently to undo all the damage.
My missed payments had serious consequences
When I emerged from my medical emergency and got home from the hospital, missed credit card payments weren’t at the forefront of my mind: I was focused on recovery. When I did have the mental capacity to face my finances, I had assumed that my mostly on-time, albeit not perfect, payments were enough to spare my credit score at least a little.
But the damage had been done: I had hundreds of dollars in late fees from almost four months of unpaid bills, and my credit score had plummeted by close to 200 points.
Unfortunately, a one-time delinquency is enough to put a significant dent in your credit score. This is because up to 35% of your score is determined by payment history. A late payment of more than 30 days can lower your score by as much as 100 points, even with a previously pristine credit history. Overdue payments can also impact your credit history for up to 7.5 years after the fact.
In addition to the late fees and ding to my score, I was charged a penalty APR. A penalty APR is an elevated interest rate, which can be up to two times your normal rate, that is applied to your balance. And while not all cards charge penalty APRs, those that do can charge you an elevated rate on new charges for up to six months.
Although I tried to undo the damage by getting back on track and making partial payments, my late fees, coupled with my new sky-high interest rate, made it costly and difficult to pay down my balance. Between this and the hospital bills I had racked up, I became overwhelmed and fell further behind on my credit card payments.
What I wish I had known
When I was drowning in credit card debt, I had assumed that I didn’t have any options — that all I could do was try to pay what I could and that with time, things could hopefully be repaired. But what I didn’t know was that because my delinquencies were due to a medical emergency, there were options available that could have helped me more easily manage paying back what I owed and deal with the subsequent financial strain. And had I known these options were available to me, I would have immediately taken advantage of them.
Hardship programs can help
Some credit card issuers offer hardship plans that can help alleviate the financial burden brought on by emergencies like natural disasters, loss of income, unexpected illness or, as one would hope, a worldwide pandemic .
“(These) programs may include temporarily reducing interest rates, lowering minimum payments, waiving late fees, and/or extending due dates,” said Katie Ross, executive vice president of the nonprofit American Consumer Credit Counseling, in an email. But not all credit card issuers offer hardship plans, and even those that do don’t always clearly outline the process on their websites, she noted.
If your credit card issuer has not clearly stated on its website that it offers a hardship plan, don’t be afraid to call anyway to see what options it might be able to offer, Ross advised. To reach your issuer, dial the number on the back of your card.
Before you call, though, make sure you’ve worked out what to say and what to ask for.
“It’s important to prepare for the call ahead of time,” Ross said. “Be prepared to offer documentation explaining your financial issues.”
In the case of my medical emergency, for instance, I would have needed to provide a clear explanation of my hospitalization, how it caused my initial delinquency and my subsequent inability to pay my balance, and what type of assistance I needed, among other things.
Understand the terms
It’s important to note that not all hardship requests will be granted and that even for those who are able to enroll in a program, what is offered will differ based on each individual borrower’s circumstances.
“There is no one-size-fits-all hardship program that credit card companies offer everybody,” Ross said.
For example, American Express states on its website that eligibility in its financial relief program will be determined by “delinquency status, prior enrollment in the program or the balance on your card account.” Terms apply.
Once you’ve signed on to a relief plan, it’s important to get your agreement in writing. Some programs charge fees or come with conditions on card usage and length of program enrollment, so understanding your specific terms is crucial.
It’s OK to take a second to breathe before diving in
Being met with a large financial burden after my hospital stay was challenging. I didn’t feel like I had a full enough grasp on my recovery, much less on how to handle the debt I was faced with.
“The first step in managing the potential financial toll is taking the time to just recognize, ‘Are you OK?’” says Aja Evans, a financial therapist. “And usually the answer is probably gonna be no, but give yourself the time to just process that.”
Once you’ve taken the time you need to tend to yourself physically and emotionally, making a plan can help to further alleviate the stress of tackling what’s ahead of you.
“If you have a plan for how you’re gonna pay back the debt, it’s gonna be a lot easier to navigate it emotionally,” Evans says.
If you’re unable to enroll in a hardship plan or your card issuer doesn’t offer one, there are alternative steps you can take to ease your debt.
Talk to a credit counselor
Credit counselors from nonprofit credit counseling agencies can advise you on what your options are. They’re able to create a tailored plan for tackling your credit card debt. “They could enroll you in a debt management program to help you pay off that debt,” Ross said. “And in these programs, interest rates are lower and late fees are typically waived.”
Balance transfer credit cards
A balance transfer allows you to move debt from a high-interest card to a new account that charges lower interest, which can make it less costly and faster to pay off your debt. The best balance transfer cards come with $0 annual fees as well as lengthy introductory 0% APRs. Note, however, that these kinds of cards typically require good to excellent credit, which may be a tough hurdle to clear if your credit has already been dinged. These cards also generally charge a balance transfer fee, usually 3% to 5% of the total amount transferred.
Add a consumer statement to your credit report
Ross suggested adding a consumer statement to your credit report, which can help to explain why you missed or made late payments on your credit cards. “This won’t have any impact on your credit score, but that notation could help lenders understand your situation,” she said.
Statements are limited to 100 words or less and can include as much or as little detail as you deem appropriate for your specific situation.
“These statements can be as simple as ‘I was unable to make payments on this account due to the fact that I lost wages during the COVID-19 pandemic,’” Ross said.
Typically, you can submit your statement by mail or online, although the process differs across the three major credit bureaus. To submit one through Equifax, for example, you can physically mail in your statement to the bureau or add it to your consumer report online.
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Funto Omojola writes for NerdWallet. Email: firstname.lastname@example.org.