Jeff Gitlen

There has been a popular myth circulating for ages about how medical debt can impact your credit score. It has been said that unpaid medical debt doesn’t affect your credit – at least not as much as other forms of debt. While that may be true under certain circumstances, what you don’t know about medical debt and your credit could come back to haunt you for many years.

It is true that medical providers aren’t as likely to report unpaid bills to the credit bureaus. However, if your debt goes to collections, it is likely to show up on your credit report. A big part of the myth says that, even if it does appear on your credit report, medical debt is treated differently by the credit bureaus who will not assign a heavy weighting to it in scoring your credit. That may be true as well, depending on the credit bureau and which scoring system it uses. However, in some cases, medical debt is treated the same as any other debt that goes unpaid.

How Medical Debt Shows up on Your Credit Report

Because of the many complications that can arise in getting medical bills paid, medical providers tend to allow a certain amount of time to pass before they clamor for payment. By law, at least 180 days must pass before an unpaid medical debt can be reported to the credit bureaus.

Even then, they are not likely to report it because most don’t have a relationship with the credit bureaus. It is only when they give up and turn your debt over to a collection agency that there is a possibility it will be reported to the credit bureaus. By the time you are contacted by a collection agency, the unpaid bill is likely to appear on your credit report as a collection and that’s never a good thing.

Having any type of collections show up on your credit report will hurt your credit score, especially if you don’t have any other blemishes on it. Collections linger on your credit report for up to seven years, at which point they will drop off. In the meantime, you may be unable to qualify for favorable rates on credit cards or loans. However, a medical collection account may not have as a big an impact on your credit score as some other accounts, depending on the scoring model used.

The Impact of Medical Debt on Your Credit Score

With older credit scoring models, lenders treat collections accounts all the same, regardless of whether they are paid or unpaid and regardless of what type of debt it is. If the collection is for medical debt, the lender will score it harshly even if you paid the debt.

Newer credit scoring models, which are not yet in widespread use, treat medical debt a bit differently. The FICO 9 scoring model disregards collections that have been paid. It also assigns less of a weighting to medical debt. Your score will still be affected, but not as much as if it were some other form of debt. Also, even though the collections will remain on your report for seven years, its impact is diminished over time. Just be aware that most mortgage lenders still use the older FICO 8 scoring model.

How to Minimize the Impact of Medical Debt on Your Credit Score

It is not at all uncommon for medical bills to go to collections in error. In many cases it’s due to a delay in payment by the insurance company. Sometimes it’s because of an unpaid co-payment. If a medical collection shows up on your credit report and you think it is an error, there are some steps you can take to possibly get it removed.

  • First look at the date of the medical bill. If it is less than 180 days old, you can contact the credit bureaus and request that it be removed from your credit report. You still have to address the issue of why it is showing as unpaid.
  • ​If a medical bill in collections has been paid by the insurer, you can dispute it with the credit bureaus that are reporting the error. They should remove it pending an investigation into the matter. You will need to provide documentation that proves the bill was paid.
  • ​If the collections account is legit, contact the agency and negotiate a payment structure that includes removal of the item once the bill is fully paid. Collection agencies are not required to remove the item from your report, but some will work with you.
  • ​If you have an unpaid medical bill that has yet to go to collections, contact your medical provider. If your insurance doesn’t cover it, arrange a payment schedule with the provider. That will likely prevent it from going to collections.
  • ​If an unpaid medical bill has gone to collections, try contacting your medical provider. You might still be able to arrange payments with them and have them pull the bill back from collections.
  • Always follow up with your health insurance company after a doctor or hospital visit to verify what is covered and what you owe. If you are unable to pay the amount you owe, contact your medical provider to arrange a payment schedule.