Do Medical Bills Affect Your Credit?

Medical debt is a significant financial issue for many Americans, and unpaid debt can hurt your credit score. Even though the credit bureaus have recently tightened the rules for reporting medical debt, there are still some situations when it can affect your credit.

So, do medical bills affect your credit? They can, but as long as your debt doesn’t get sent to collections, it probably won’t wind up on your credit report and affect your score. Some medical debt management strategies could help prevent you from having it sent to collections, too.

How medical debt appears on your credit report

Healthcare providers do not report debt payments like financial institutions, so your medical debt must be sent to collections to show up on your credit report. Generally, it takes a while for a debt to reach that point, and those healthcare providers will likely contact you often and may try to help you work out a payment plan first.

Once unpaid medical bills have been sold to a debt collection agency, they won’t be reported by the major credit bureaus right away. There’s a yearlong waiting period before medical debt shows up on your credit report, giving you time to work with your insurer or pay down the debt yourself. Medical debts less than $500 won’t show up on a credit report at all.

Once it’s paid, medical debt will no longer appear on your report.

How medical debt lowers your credit score

Having any debt sent to collections is a serious credit event that will hurt your credit score significantly. While you have a one-year grace period to pay off unpaid medical bills in collections, if it ever shows up on your credit report, it will hurt your FICO Score, one of the models used to grade credit histories.

VantageScore, a different credit score model, is implementing a new system for calculating their scores. It will no longer include medical debt, even if it’s unpaid and has been in collections for over a year.

Recent changes to medical debt reporting

In 2022, Equifax, Experian and TransUnion announced that they would be changing medical collection debt reporting policies. Paid-off debt was no longer included on credit reports, and the waiting period for having debt in collections show up was extended from six months to a year. Debts under $500 are also no longer reported as of 2023.

Avoiding credit issues due to medical debt

While unexpected or massive medical bills may be very difficult to repay, you have some resources that can minimize what you owe or prevent unpaid medical debt from being sent to collections.

Use your health insurance

Depending on whether you’re covered by health insurance and what kind of plan you have, your insurer may be on the hook for a portion of your medical bills — or the entire debt. The first step is to submit a claim, though your healthcare provider may have already tried to bill your insurance. Unfortunately, you may need to fight your insurance company to get them to cover your medical expenses.

Negotiate with providers

Another option is to see if it’s possible to negotiate with your healthcare provider. Pricing models could be different for uninsured people and those that certain insurers cover. Financial hardship could help convince them to lower your bill or offer more favorable repayment terms. Healthcare providers are often willing to work out an installment payment plan to help you pay your medical bills over time and avoid having the debt sent to collections.

Find financial assistance

Even if your healthcare provider doesn’t provide financial assistance, you could find medical debt relief from programs designed to help people pay their bills. The Consumer Financial Protection Bureau has compiled financial resources for medical debts.

Consolidate your debt

As with any debt, you could use a medical debt consolidation loan or get a 0% intro APR credit card to repay. Sometimes those products offer more favorable repayment terms. They have some downsides: You could wind up falling deeper into debt, and refinancing may prevent you from getting debt relief intended for medical debt. Plus, bad credit borrowers may not be approved for a new credit card or may only get high interest rates on a personal loan.

Consider a medical loan

Some lenders offer medical loans, which are personal loans for medical costs. These types of loans can help you repay medical debt with a fixed interest rate and fixed monthly payments, but you’ll be paying extra in interest and potential fees.

Disputing credit report errors

Since these credit reporting rules have recently changed, it might be worth checking your free credit report to see if there is any medical debt information that shouldn’t be there. If you find that debt has been incorrectly reported, you can file a dispute with the credit bureaus to get it fixed.

Credit bureaus are legally obligated to investigate disputes and contact you with the results — the process often takes about a month. You may also need to contact the source of the incorrect credit data (perhaps a debt collection agency).

You cannot successfully dispute correct information. A medical debt that has been in collections for over a year can appear on your report. But, if you pay it off, it will be removed.