Turbo Takeaways
- Paid medical collections are no longer reported by the three major credit bureaus, so resolving a bill removes it from your report entirely.
- Some financial institutions have historically overlooked modest medical debt on an otherwise clean credit report, especially for long-standing customers.
- If medical bills are part of a larger debt problem, options like debt settlement can help address multiple unsecured balances at once.
Medical Debt and Your Credit: The Basics
If you’ve been struggling with medical bills, you’re not alone. Over 40% of Americans carry medical debt due to rising health care costs and unpaid bills.
The good news is that the credit industry treats medical debt differently from other types of debt. Unpaid medical bills don't show up on your credit report for 365 days, and balances under $500 won't appear at all.
That said, once a medical bill does reach your credit report, it can stay there for seven years unless you pay it off. There are several ways to address large medical bills before that happens, from negotiating with your provider to applying for financial assistance and getting a medical credit card.
Do Medical Bills Affect Your Credit?
Most healthcare providers don’t report to the three major credit bureaus: TransUnion, Equifax, and Experian. So, does medical debt affect your credit? Once your medical debt is 60, 90, or 120 days past due, medical providers may sell it to a collection agency.
After your bill goes to collection, the credit bureaus give you a 365-day window to resolve the debt or dispute any errors. Paid medical collections also won’t impact your credit score. If the initial debt is less than $500, it won’t impact your score at all.
However, once it shows up on the credit score, it will remain there for seven years. While you can’t go to jail for not paying medical bills, it can impact your creditworthiness and make it difficult for you to get new credit at competitive terms in the future.
Did You Know?
Some financial institutions have historically overlooked modest amounts of medical debt on an otherwise clean credit report, particularly for long-standing customers in good standing.
Meanwhile, many financial institutions have offered concessions on medical debt. “After the major economic events we’ve experienced in recent years, such as the Financial Crisis of 2008 and the COVID-19 pandemic, banks and major credit card companies have allowed for certain considerations when it comes to medical debt,” explains Brad Reichert, founder and managing director of Reichert Asset Management LLC.
“For example, when approving an existing cardholder’s request for a credit line increase, some financial institutions have traditionally overlooked modest amounts of medical debt that may be on an otherwise clean credit report, especially if the cardholder has been an otherwise excellent customer of the bank for 2-3 years or more,” shares Reichert.
8 Ways to Pay Off Medical Debt and Protect Your Credit
If you’re left with a large debt after an illness or an accident, there are several options available. Consider repaying your bills as soon as possible to start repairing your credit score.
Here are eight helpful tips to pay off your medical debt and give your credit score a boost:
- Set Up a Payment Plan
Work with your healthcare provider to set up a payment plan to break a large bill into manageable monthly payments. Check for additional fees or interest, as this can increase your debt. Make sure to pay the minimum monthly payments on time to protect your credit. - Contact the Insurance Company
Check your health insurance policy after receiving a healthcare bill to see which charges it covers. Contact your insurance company by email or phone to confirm it pays those charges, so you only worry about what isn't covered. - Consider Medical Debt Consolidation
You can get a debt consolidation loan to combine multiple medical bills into one monthly payment. These medical debt consolidation loans may offer favorable terms, especially for those with good credit. Compare options to find the lowest interest rate. - Negotiate Bills
Negotiate with your medical provider to reduce your bill, especially if you're facing financial hardship. They may offer better repayment terms or accept a lump sum to settle the debt. - Hire a Billing Advocate
Medical billing advocates work with insurers and providers to resolve debts on your behalf. They can help you review bills, dispute errors, and potentially save money and time. - Get a Medical Credit Card
Many healthcare providers offer medical credit cards to help patients spread large bills over multiple payments, which can be useful for planning and affordable monthly payments. However, high interest rates and fees may make them costly; consider your options carefully. - Crowdfund Your Medical Bill
Another option for paying large medical bills is to set up a fundraiser. Crowdfunding platforms like GoFundMe help raise funds from friends, family, and even strangers. Although it may take time, this is a good way to pay off large medical bills without taking out a loan. - Apply for Financial Assistance
Several organizations, like the Patient Advocate Foundation, HealthWell Foundation, and RIP Medical Debt, can assist with large medical expenses. If you're facing financial hardship, a nonprofit grant might be available. Medicaid may also retroactively cover medical bills if you qualify.
Managing Medical Debt Before It Affects Your Credit
While unpaid medical bills don’t impact consumer credit reports the same way as other types of debt, they can stay on your credit history for seven years once they go to collections. However, paid medical debt won’t appear on your credit report.
Speak to your healthcare provider to set up a payment plan, negotiate a debt settlement, or approach a nonprofit organization for financial assistance.
If medical bills are just one part of a larger debt problem, you don't have to figure it out alone. TurboDebt® can help you explore debt relief options to address multiple balances at once.
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