How Does Medical Debt Affect Your Credit Score
6 MIN READ
Published October 23, 2023 | Updated November 17, 2023
If you’ve been struggling with medical bills, you’re not alone. Over 40% of Americans had medical debt in 2022. Luckily, the credit industry has deprioritized medical debt. Unpaid medical debt doesn’t show up on credit reports for 365 days, and if you’ve got a debt under $500, it will not show up at all.
However, once a medical bill does appear on your credit report, it will stay there for seven years unless you pay it off. There are several ways to deal with large medical bills, including negotiating with your healthcare provider, 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 provide you with a waiting period of 365 days 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.
However, many financial institutions have allowed some concessions when it comes to medical debts. “After the major economic events we’ve experienced in recent years, such as the Financial Crisis of 2008 and the COVID 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 Your Medical Debt and Improve Credit Score
If you’re left with a large debt after an illness or an accident, there are several options available. Consider repaying our bills at the earliest so it won’t negatively affect your credit score.
1. Set Up a Payment Plan
Try to work with your healthcare provider to set up a payment plan. This will allow you to break down a large bill into smaller, more manageable monthly payments. Be sure to check if the provider will add any fees or interest to the original bill because it may add up to your original debt. Once you set up a repayment plan, paying the minimum monthly payments as agreed is important so it won’t affect your credit.
2. Contact the Insurance Company
Once you receive a bill from the healthcare provider, check your insurance policy to see what charges they cover. Contact your health insurance company by email or phone to ensure that it’s paying the bills covered by the policy, so you only have to worry about paying the charges that aren’t covered.
3. Consider Medical Debt Consolidation
If you’ve got multiple medical bills, you can get a debt consolidation loan to roll multiple payments into a single monthly payment. Medical debt consolidation loans may be available at favorable repayment terms, especially if you’ve got good credit. You’ll need to compare your options to ensure you get the lowest possible interest rate.
4. Negotiate Bills
Negotiate with your medical provider to lower your bill. Pricing can vary depending on whether you’re insured or not. If you’re facing financial hardship, your healthcare provider may be willing to lower your bill or offer you better repayment terms. You can then pay a lump sum to settle your debt.
5. Hire a Billing Advocate
Medical billing advocates can work with insurance companies and healthcare providers to help resolve medical debt on your behalf. They can help you review bills and dispute errors and may help you save thousands of dollars and a lot of time by dealing with insurers and healthcare organizations.
6. Get a Medical Credit Card
Many doctors, dentists, and other healthcare providers offer medical credit cards to patients so they can spread large medical bills over multiple payments. This may be a good way to plan for your medical bills in advance and pay for them through affordable monthly payments. However, they may end up costing you a lot due to high interest rates and fees, so be sure to consider your options before you get one.
7. Crowdfund Your Medical Bill
Another option to pay large medical bills is by setting up a fundraiser. Crowdfunding sites like GiveForward can help you 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.
8. Apply for Financial Assistance
Several organizations can help you cover large medical expenses, such as the Patient Advocate Foundation, HealthWell Foundation, and RIP Medical Debt. If you’re facing financial hardship, you may qualify for a grant from a nonprofit organization. If you qualify, Medicaid may also cover medical bills retroactively in some cases.
The Bottom Line on Medical Debt and Its Impact on Credit Score
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 it goes 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 settlement, or approach a nonprofit organization for financial assistance.