How Medical Debt Can Impact Your Credit Score

Updated: August 21, 2020

medical bills on credit report

While they might not affect your credit score as much as other kinds of debt, medical bills can still lower your score. When it comes to medical debt, prevention is worth a pound of cure. 

Will medical bills show up on my credit report?

Medical debt is a serious problem in the United States. Studies reveal some alarming statistics:

  • Medical debt is responsible for 66.5% of all personal bankruptcies in the U.S.

  • 137 million Americans face financial hardship due to medical bills.

  • Medical debt is the top reason people cite for cashing in their retirement accounts.

With so many people treading water financially because of out of control medical costs, it's normal to worry that medical bills will hurt your credit. Medical bills can definitely impact your credit score, especially if you have a great deal of debt. 

In many cases, it's not your doctor or hospital that reports your unpaid debt to the credit bureaus. Rather, your doctor or hospital sells your delinquent account to a collection agency that pursues collection of the debt and also reports it to the credit bureaus.

How long do medical collections stay on your credit report? 

Medical collections remain on your credit report for seven years. Unlike other kinds of debt, however, they get deleted once you've paid them. 

There are several strategies for removing negative items from your credit report. For example, you could offer your creditor a lump sum settlement or set up a payment plan. 

Do the credit bureaus treat medical bills differently?

Medical debt can be a big source of stress, but there is a silver lining of sorts. The credit bureaus distinguish medical debt from other kinds of debt, which can minimize their impact on your score. 

  • 180-day waiting period - An amendment to the Fair Credit Reporting Act (FCRA) requires the credit bureaus to wait 180 days before posting a medical debt to your credit report. This delay is designed to give you an opportunity to investigate the debt with your insurer or health care provider and resolve it before it hurts your score. 

  • Removal for paid medical debt - Another difference between medical debt and other types of debt is the mandatory removal of paid medical bills. If you pay off your medical bill or your insurance ends up covering it, the credit bureaus must delete it from your report.

Additionally, the most recent credit scoring models assign less weight to medical debts compared to other forms of debt.

How medical bills affect credit

Although the credit bureaus treat medical debt differently compared to other types of debt, medical bills can still hurt your credit score. Your payment history makes up 35 percent of your score, so paying medical bills late can do a lot of damage.

A low credit score can have a ripple effect across your finances, making it hard to get approved for a loan or credit card. You might also end up paying higher interest rates, which can lead to more debt.

In addition, some employers run credit checks on prospective employees. If you have a bad credit score, you might get turned down for a job because a company has doubts about whether you're responsible enough to manage money.

How to lessen the impact on your credit score

There are several things you can do to minimize the negative effects of medical debt on your credit score. Here are five strategies to keep in mind. 

1. Keep track of your medical bills

The health insurance system can be a nightmare to navigate, and it's not always easy to understand what part of your medical care is covered and what parts you're obligated to pay. Many people's plans are complicated by deductibles, co-pays, in-network vs. out-of-network providers, and other factors.

If you see a doctor or receive medical treatment, do your best to track all your bills. It helps to write everything down or make a spreadsheet so you know which bills you've paid

Remember that you have 180 days to follow up with your providers regarding any medical bills that go to collections. This gives you six months to resolve a medical debt before it posts to your credit report.

2. Get an itemized statement

You've probably heard stories of people charged hundreds of dollars for a band aid or thousands just to walk into the ER. Asking for an itemized bill can help you avoid being double charged or overcharged for services.

If you see a questionable charge or spot an inaccuracy, contact your insurance company or health care provider and get the bill corrected. If you're willing to keep an eagle eye on your medical bills, you can save money over time and hopefully avoid any surprises on your credit report.  

3. Negotiate a settlement

If your medical bill has been turned over to a collection agency, there is a decent chance you can negotiate a lower amount. Collection agencies generally buy debt for pennies on the dollar, so they are often willing to accept a settlement.

First, verify the debt is legitimate. If the debt belongs to you, contact the collection agency and offer a settlement.

In most cases, it's best to offer a lump sum in exchange for the collection agency removing the debt from your credit report. This resolves the debt in one payment and gets the obligation off your plate. 

4. Work out a payment plan 

Don't wait until a medical bill is overdue to address it. If you know ahead of time that you're going to struggle to pay a bill, talk to your health care provider right away.

In many cases, providers are willing to accept payments. They might also give you an extended repayment period so you can stretch out your payments over several more months.

If you go this route, it's a good idea to get everything in writing. That way, you have proof of the agreement in the event of a billing glitch or some other mishap that results in your bill being turned over to a collection agency. 

5. Don't swap medical debt for other debt

You might be tempted to put all your medical debt on a credit card, especially if you're being harassed by debt collectors or a disgruntled doctor's office. However, this could end up costing you more money in the long run.

Medical debts are typically low-interest, and it's often possible to work out a payment plan with your provider. By contrast, credit cards have variable interest rates that range much higher than rates for medical bills.

4 ways to remove medical bills from your credit report 

If a medical debt is impacting your credit, there are a few ways you can try to get it removed from your credit report.

1. Ask the collection agency to validate the debt

By law, collection agencies and other creditors must be able to prove that a debt belongs to you. If they can't do so, they must remove it from your credit report. 

The best way to request validation is by letter because it creates a paper trail. Consider sending your letter via certified mail so you can prove the collection agency received it.

Once the collection agency has your validation request, it has 30 days to validate your debt.  

2. Dispute the debt on your credit report

You can also dispute medical debts that appear on your credit report. To do this, you'll need to get a copy of your credit report, which you can do by visiting annualcreditreport.com

Federal law only allows the credit bureaus to report debts that are accurate. You can take advantage of this by reviewing your report and highlighting any inaccurate information. 

Look for any accounts that don't belong to you, as well as duplicate accounts or accounts with incorrect information, including wrong dates, debt amounts, or account numbers.

Once you have identified inaccuracies, you can file a dispute with the credit bureaus. From there, the credit bureaus must either correct your credit report or delete the inaccurate item. 

In some cases, you get lucky and the credit bureau is unable to verify the debt. When this happens, they delete the item from your report. 

3. Hire a credit repair company

If you've tried removing medical debt from your credit report on your own with no success, you can try hiring a credit repair company

Keep in mind that a credit repair company can't do anything you can't already do by yourself. However, they have more knowledge and resources for disputing debts, and they may be able to get results.

4. Pay the debt

The good thing about medical debts is that paying them gets them off your credit report. This is different from other types of debts, which can stay on your report for years after you have paid them. 

If a medical debt is hurting your credit score, get in touch with the creditor that reported it to the credit bureaus. In many cases, you can negotiate a settlement for less than what you owe. 

Tips for paying off medical debt

Medical bills can be a huge source of stress and anxiety, especially if a provider has turned your account over to collections. Here are some ways to keep medical bills from piling up and derailing your finances.  

  • Negotiate a lower bill before treatment - In some cases, you can negotiate a reduced medical bill prior to receiving treatment. If you know you'll have a difficult time paying your medical bills, ask your provider if it's possible to lower the cost of your care.Hospital billing experts suggest asking for the Medicare price, which is almost always a great deal lower than what hospitals charge commercial insurance companies. If you have already received treatment, call your provider's billing department and ask for a price adjustment. 

  • Set up a payment plan - Many physicians and hospitals allow patients to make payments on their bill. As long as you pay a reasonable amount on a regular basis, they are unlikely to send your account to a collection agency.

  • Ask about financial assistance - Some hospitals offer financial assistance plans to people who can't afford to pay their medical bills. If you meet the income guidelines, the hospital might significantly reduce your bill or get rid of it altogether. 

FAQs

The following are some of the most common questions and answers regarding medical debt and your credit score.

Can I stop medical bills from landing on my credit report?

You can stop a medical bill from ending up on your credit report if you pay it or your insurance covers it. While you can't do anything to stop a legitimate medical debt from going on your credit report, the law gives you 180 days to take care of it before that happens. 

This is why you should never simply ignore a medical bill. Instead, work out a payment plan with your creditor so the bill doesn't go on your credit report. 

Are medical bills on your credit report a HIPAA violation?

Federal law gives health care providers the right to pursue collection of a debt, including selling delinquent accounts to collection agencies. However, the law also limits what kind of personal information providers can disclose.

It's not a HIPAA violation for a provider or collection agency to report your medical debt to the credit bureaus as long as the information is limited to: 

  • Your name

  • Address

  • Social security number 

  • Date of birth

  • Name and address of the provider that gave treatment

Hospitals and other providers can't share your treatment records with collection agencies or other third parties. If they do, this is a potential HIPAA violation, and you should file a dispute with the credit bureaus.  

Do medical bills in collections ever go away?

A medical debt will stay on your credit report for seven years unless you pay it or your insurance company ends up paying it. An unpaid medical debt will fall off your credit report seven years from the date of the delinquency.  

Can I pay medical bills with a credit card?

While there is nothing stopping you from paying your medical bills with a credit card, finance experts caution against it. 

Many health care providers, including hospitals, will work with you if your budget is tight. For example, they might offer a financial hardship payment plan or accept payments with zero or low interest. 

If you put your treatment on a credit card, you're stuck negotiating with the credit card company. In addition, credit card interest rates are typically a great deal higher than any interest you'll pay from a doctor's office or hospital billing department. 

Can medical bills be forgiven?

Yes, medical bills can be forgiven in some cases. Your chances of getting medical debt wiped out are higher if you received treatment at a larger hospital. 

This is because large hospital systems and other well-established medical institutions are more likely to offer debt forgiveness programs. To apply, you will probably need to show proof of your income, including tax returns, pay stubs, and a list of other debts.

Conclusion

Medical debts can negatively affect your credit score, so it's important to keep track of your medical bills and pay them before they hit your report. Fortunately, most health care providers are willing to accept reasonable payment plans with little or no interest, and financial hardship programs may be available if you're truly unable to pay.


About the Author


Mike Pearson

Mike is a recognized credit expert and founder of Credit Takeoff. His credit advice has been featured in CNBC, Investopedia, CreditCards.com, Bankrate, Huffpost, The Simple Dollar, Reader's Digest, LendingTree, and Quickbooks. Read more.

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