Can Medical Bills Affect Your Credit Score?
Key takeaways:
Beginning July 1, 2022, consumer credit-reporting agencies Equifax, Experian, and TransUnion began waiting 1 year before including unpaid medical debt on credit reports.
Credit agencies also stopped including paid medical debt on credit reports on July 1, 2022. Previously, even paid medical debt could appear on a report and negatively impact a credit score for up to 7 years.
As of January 1, 2023, medical debt less than $500 should no longer appear on credit reports. However, amounts of $500 or more may still show up and impact credit scores.
Table of contents
Medical debt can appear on your credit report if it’s unpaid and more than $500. The national consumer credit reporting bureaus — Equifax, Experian, and TransUnion — calculate credit scores based on information in your credit report.
Your credit history can affect what you pay for insurance, housing, and other consumer products. Information in your credit file also could affect whether you are offered employment.
Here’s how medical debt can affect your credit report, and how to deal with the debt so it doesn’t affect your credit.
How do medical bills affect your credit score?
Once reported, unpaid medical debt can remain on your credit report for up to 7 years — just like other debt.
Credit scores, which are based on credit reports, are rated on the FICO scale from less than 580 (poor) to more than 800 (exceptional). A medical debt collection can lower your credit score by as much as 100 points. This could hurt your chances of qualifying for other forms of credit, such as loans or credit cards, or raise your interest rates on those consumer products.
The good news is that the credit bureaus no longer include paid medical debts on your credit report. Once you’ve paid the debt, it’s removed from your credit file.
What has changed with medical debt and credit reports?
Starting in the summer of 2022, some U.S. consumers had some medical debt dropped from their credit reports. Changes were made because most medical debt is the result of an emergency or one-time medical problem and doesn’t accurately reflect a person’s credit-worthiness.
Beginning July 1, 2022, the credit reporting bureaus began waiting 1 year before including medical debt in a credit report. Previously, they waited 6 months. The longer runway gives people more time to pay medical bills or negotiate payments with healthcare providers or insurance companies.
Also, as of July 1, 2022, paid medical debt should not appear on consumer credit reports. Previously, medical debt — even if it had been paid — remained on a credit report for up to 7 years.
Finally, Equifax, Experian, and TransUnion stopped adding medical debts of less than $500 to consumer credit reports starting January 1, 2023. But unpaid medical debt of $500 or more may still appear on credit reports.
Do medical bills sent to collections affect your credit?
Debt assigned to a collection agency does not automatically appear on your credit report or affect your credit score. Collection agencies are not required to report to any consumer credit agency and may not report to all three.
Debt-collection agencies may sue you in court, depending on state law and how aggressive they are about securing payment. If there is a lien or court judgment related to your medical debt, those public records may appear on your credit report.
How many points does a medical debt collection drop your credit score?
Even a single claim of outstanding debt (including medical debt) sent to a credit agency can lower a good credit score by 50 to 100 points.
Can you get medical bills or collections removed from your credit report?
Yes. There are several ways to have medical bills or collections removed from your credit report before the typical 7-year lifespan of these debts. One of these options may work for you:
Dispute an error. If you notice incorrect medical debt listed on your credit reports, you have options. The easiest way to remove inaccurate information is to review your reports through AnnualCreditReport.com and dispute anything that is incorrect. The Consumer Financial Protection Bureau (CFPB) offers sample letters that can help you file a dispute.
Pay off your medical debt. Call the people you owe. Most doctors, hospitals, and collection agencies make payment arrangements. And many healthcare creditors are willing to negotiate debt. Many medical providers and facilities have financial assistance programs that can reduce or wipe away your debt.
Bring your medical debt below $500. As of January 1, 2023, medical debt that’s less than $500 will be removed automatically from credit reports.
Ask for a goodwill deletion. If you have only one or two late payments, it may be worth requesting a goodwill deletion of the negative information. You will need to be persistent and polite when you make the request over the phone or in a goodwill letter. While rare, you can sometimes get damaging information removed from your credit reports because you have mostly paid as agreed.
Ask your health insurance company to pay the debt. Sometimes, health insurance companies refuse to pay medical debts if you have a dispute about whether care is covered under your plan. If this has happened to you, make sure you appeal the decision. If you act quickly, you may be able to get the amount paid by the insurance company and avoid having the debt sold to a collection agency or listed on your credit report.
Hire a credit repair company. Credit repair companies are an option for consumers who have old debt that they are unable to pay — and was usually last paid 6 months ago or longer. Be cautious if you decide to get help from these companies, though. Not all achieve results, and some are scams. Never work with a company that charges you upfront. Legitimate credit repair companies are required to do the work before they bill you. The CFPB regularly takes action against credit repair operations that mislead consumers and charge illegal fees.
What happens if I don’t pay my medical bill on time?
Ignoring a medical bill is never a good idea. If you don’t find a way to pay your healthcare bill, the provider may sell your account to a collection agency.
Debt collectors must reveal that they are trying to reach you to collect a debt. They may contact you in several ways, including by:
Calling you on the phone
Leaving you a voicemail
Sending you a letter in the mail
Contacting you via social media
Debt collectors have a dubious reputation for being aggressive in their efforts to make people pay, but consumers have some protections. Under the Fair Debt Collection Practices Act, it is illegal to harass or threaten someone while trying to collect a debt. As of November 2021, there are additional rules about how debt collectors may communicate with you and your rights in debt collection.
A healthcare provider may sue you for an unpaid debt. This legal action may have the following results:
A civil judgment
A lien against your property
A court order to garnish your wages for repayment
Can medical bills be forgiven?
Yes, medical bills can be forgiven. But it’s important to note that debt forgiveness is not the same as debt settlement.
Debt forgiveness — also known as debt cancellation — happens when a bill is overdue but the creditor is no longer pursuing collection. Debt forgiveness typically doesn’t affect your credit score, but the amount forgiven can be reported to the IRS and could be taxed as income.
A debt settlement — or paying less than what is owed — can impact your credit score. The unpaid amount of the settlement may be reported as income for tax purposes, as well.
What happens to my credit score once I pay off my medical debt?
Beginning July 1, 2022, credit-reporting agencies will stop including paid medical debt when calculating credit scores. Having fewer negative items on your credit report can increase your score.
How can I access my credit reports?
Creditors are not required to report to any consumer credit agency and may not report to all three. That’s why you need to review your reports from Equifax, Experian, and TransUnion.
Free credit reports are available once a year from each of the three national consumer credit-reporting agencies via Annualcreditreport.com, which is the only source for free credit reports authorized by federal law. You also can pay for reports if you need to check more frequently.
The bottom line
Medical debt can show up on your credit report and hurt your credit score. However, consumers are now in a more favorable position when it comes to medical debt.
As of July 2022, consumer credit-reporting agencies will wait 1 year before including unpaid medical debt in credit reports. The three credit bureaus — Equifax, Experian, and TransUnion — also will stop including paid medical debt in credit reports. Medical debt less than $500 stopped appearing on credit reports on January 1, 2023.
If you have medical debt, explore your payment options before the debt goes to collections or gets reported to a credit bureau. You may be able to reduce your charges, get help from a financial assistance program, or ask for a goodwill deletion, among other options. Visit Annualcreditreport.com to access a free credit report once a year from each of the national consumer credit-reporting agencies.
Why trust our experts?
References
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This article is solely for informational purposes. This article is not professional advice concerning insurance, financial, accounting, tax, or legal matters. All content herein is provided “as is” without any representations or warranties, express or implied. Always consult an appropriate professional when you have specific questions about any insurance, financial, or legal matter.
