Neglecting overdue medical bills can hurt your credit score. So much so that it will have a long lasting and cascading negative effect on your credit card interest rates not to mention your overall self-esteem. I mean who actually likes to know that they have a bad credit score?

Below are some of the few things you can do depending on what sort of situation you are in. Whatever you do, Credit Report Source’s advice is to confront your responsibilities to the best of you ability and do whatever it takes to protect your credit score.

1. Don’t be afraid of your bills! Open and review all of your bills no matter how scary and depressing this maybe. Confronting your expenses is the first step in dealing with a problem should you have one.
2. Savings, savings and savings! I know this is difficult to do during a recession, let alone if you’re laid off. However, I recommend trying to skip a few times eating out or try to avoid unnecessary expenses. Take a look at your daily activity, can you skip buying a cup of coffee a day or two a week? Can you reduce your cell phone or cable bill for a month or two? There are probably other types of discretionary spending you can identify and cut back on. Take that money you would save and put it aside in an interest bearing savings account.
3. Flexible spending accounts. If you are employed, check with your employer and see if they are participating in a flexible spending or “cafeteria plan” type program. A flexible spending account allows you to put aside some money from your paycheck, tax free, which can then be used to pay for medical expenses. The money you put aside is usually placed into a debit/visa type card which you would use to pay for co-pays or medicine, etc. This is a smart way to avoid having to pay “out-of-pocket” for some of your medical expenses.
4. Communicate with your Insurance Company. Most companies, I like to think, do not want to harm your credit report in anyway. If you owe money, call them and setup a payment plan. They usually do this interest free. Unless, if you are unable to pay at all then see if they would allow you to put a hold on the account and collections activity until your employment situation is resolved. You generally would need a letter faxed from your employer stated that you are unemployed, etc.

We sincerely hope these tips are useful and would love to hear from you and your own experiences.

To avoid falling into the dreaded financial black hole — a low credit score — try to avoid the following factors, several of which consistently drive credits scores down.

Try not to:

File for bankruptcy:. It certainly isn’t rocket science — filing for bankruptcy will destroy your credit score. In fact, declaring bankruptcy can knock as much as 200 points off your credit score.

Frequently apply for a credit card, loan, or mortgage: If you have an established credit rating, your FICO credit score will drop anywhere between 15 and 20 points each time that you apply for a new credit card, loan, or mortgage. That being said, limit your amount of credit cards to a number that you actually need. It may be tempting not to resist an offer for a credit card from your favorite store at the mall — from Banana Republic to Neiman Marcus — but try to avoid doing so. In the long run, saving 15% on a transaction with your Gap card will never cover the costs that you will incur as a result of a lower credit score. My best advice: Try to consistently zone out cashier(s) when they begin to chime in with additional offers before you make a purchase. As someone who used to frequently sign up for credit cards at Major League Baseball games solely to receive a free towel or T-shirt, trust me on this.

Max out credit cards: If you max out a credit card, it could cost you anywhere from 20 to 120 points on your credit score. To prevent ever maxing out a card, never carry a balance of more than 25% of the credit card’s total limit.

Miss monthly payments: If you miss a monthly payment, even only one time, you can lose up to 35 points on your credit score. I say this frequently in my posts, but regularly paying back bills on time is one of the best ways to improve a credit score.

For more factors that lower credit scores, click here.