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How Do Medical Bills Affect Your Credit?
By Bianca Rodríguez Rojas MONEY RESEARCH COLLECTIVE
Even people with medical insurance often pay deductibles or other out-of-pocket costs when seeking medical treatment. For those who don’t have the funds at hand, these emergency or routine care bills can add up, leaving many wondering how medical debt will affect their credit score.
Read on for an overview of the policies governing the reporting of medical debt to better understand how unpaid medical bills could potentially impact your creditworthiness.
Does Medical Debt Affect Your Credit Score?
Medical debt can affect your credit score, but only if you have an unpaid balance of over $500 and the account is sent to collections. This policy comes after the three major credit bureaus (Equifax, Experian and TransUnion) implemented policies to alleviate the impact of medical debt on your credit score.
The first went into effect in 2022 and excludes paid medical debt or unpaid debt that’s less than a year old from showing up on consumer reports. The other policy change (this one from 2023) removed all medical debt under $500 from credit reports.
With these changes, the Consumer Financial Protection Bureau (CFPB) estimated that about half of Amercians with medical debt would have it removed from their report.
These policies have significantly helped consumers, but those with medical debts that surpass the $500 threshold might still see an impact on their credit score.
How do unpaid medical bills affect your credit?
Unpaid medical bills can affect your credit if you owe more than $500 and the debt is over a year old.
Before the recent policy changes, credit bureaus could report unpaid medical debt after it had been delinquent for just six months. The newly extended one-year grace period gives consumers time to pay their medical bills or negotiate coverage through their health insurance before it impacts their credit history.
After a year, consumers who couldn’t pay their bills might see the account on their credit report if the medical service provider sends it to collections. This delinquent account will then affect their credit score until the debt is paid.
Do note that some scores treat unpaid medical bills differently. For example, FICO 9 (the latest FICO scoring formula) considers unpaid medical bills less significant than other non-medical debts, like personal loans or credit cards.
What To Do When You Receive a Medical Bill
Start by reviewing your bill for any inaccurate or incorrect information, such as duplicate charges or being charged for services you didn’t receive. Mistakes like these delay the time it will take your insurance provider to review the claim and issue coverage or a reimbursement for bills paid.
If you find any errors, contact the healthcare provider’s billing department to request a correction. (Keep records of all your communications with the provider or billing department for future reference, if needed.)
Once you receive a corrected bill, file a claim with your insurance company as soon as possible. You should also follow up with them after you file the claim to confirm they received it. Be sure to check the status of your claim regularly as the company may need additional information.
What To Do if Your Debt Is Sold To A Collection Agency
If your medical provider sells your debt to a collection agency, here’s what you can do:
- Don’t ignore calls or letters from the collection agency. However, know that the Fair Debt Collection Practices Act prevents collectors from using abusive, deceptive or unfair methods. This includes calling you before 8 a.m. or after 9 p.m., or contacting you at work if you can’t take calls there.
- Once you’ve established contact with the collection agency, request that they send you a debt validation notice and review it carefully. This document might include information such as your name, the name of the creditor and the amount owed.
- If you find incorrect information or you believe you don’t owe the debt, you have 30 days from when the agency contacted you to dispute the debt in writing. (After doing so, the debt collector must stop contacting you until it responds with a debt verification.)
- When the collection agency can’t verify the debt, it must stop reporting the debt to the credit bureaus. Make sure to check your reports to see if the debt is still reported under your name. If it is, you’ll have to dispute the debt with the credit bureaus yourself or hire a credit repair company to undergo the process for you.
- If the information is correct, determine how much you could pay, either in a lump sum or monthly payments. Then, contact the agency and negotiate a payment agreement.
- Once you reach an agreement (and before making any payments), ask for a confirmation letter from the agency including the terms of the agreement and where you should send your payment.
- After you pay the debt in its entirety, monitor your credit report. If the account information for the paid debt still appears, contact the bureaus to have this information removed.