Do Medical Bills Affect Your Credit?

Medical bills, even when you are insured, can be astronomical. Still, whether the amount you owe is large or small, it is important to handle your bills correctly. While healthcare providers do not report debt to credit bureaus (as lenders do), delinquent bills can still appear on your credit reports, negatively affecting your credit scores. Here's what you need to know about medical bills and credit.

How long do medical collections stay on your credit report?

If a medical bill in collection makes its way to your credit report, it can be listed for a total of seven years. The unpaid debt will be included in your credit score calculation for as long as it appears on your report. However, a lot must happen before it shows up on your report.

When a medical provider issues you a bill, whether for a copayment, deductible, or uncovered costs, it doesn't send the information to the three major credit bureaus — TransUnion, Equifax, and Experian—because your medical bill is not a loan. You didn’t borrow money from the provider; you received a service.

However, that can change if you fail to pay the bill after a specific amount of time and the amount you owe exceeds a certain threshold. In that case, the provider may send the account to a third-party debt collector, who may notify the credit bureaus.

The good news is that there are laws regarding medical bills and collections. According to the Department of Financial Protection, hospitals must wait 180 days before reporting debts or filing collection actions.

As per the Consumer Financial Protection Bureau, unpaid medical bills can be reported to the credit bureaus only if they have remained unpaid for at least 12 months. Beginning in July 2022, the credit bureaus were prohibited from including paid medical debt on credit reports and, in March 2023, the credit bureaus agreed not to list medical debts under $500, even when the balance due is unpaid and in collection.

How to eliminate medical debt and improve your credit score

There are a number of ways to manage medical debt. The best is to keep it out of collection in the first place. Contact the provider and ask if it will accept a payment plan or reduce the bill, so you can more easily pay it.

Take out a personal loan

Many doctors and dentists have arrangements with third-party companies to cover the bill as a short-term loan. If they don’t, or you’d rather handle it yourself, consider taking out a personal loan through companies such as Upstart and Upgrade. This way, you can pay over time with fixed monthly payments that fit your budget. Taking out a loan to cover a medical bill may even help boost your credit score.

As myFICO reports, payment history is the most important factor in a FICO score, accounting for 35%. A long pattern of on-time payments will be positively factored into your score, and the repaid debt will indicate that you are a responsible borrower.

The second highest weighting is the amount you owe (30%). This includes your credit utilization ratio, which measures the amount you have borrowed on revolving debt products as a percentage of the overall credit limit.

Installment loans are not factored into the credit utilization ratio, so if you max out your credit card, taking a loan to help pay for it won’t worsen your credit scores. Finally, by taking out a loan, you will add another type of credit product to your report, which can help with your credit mix, which is another scoring factor (10%).

Use a 0% APR credit card

Another option is to use a credit card with an introductory 0% annual percentage rate (APR) offer. There are two basic options:

• 0% APR card for balance transfers – This will allow you to shift existing medical bills (and other debt) to a new card that will not charge you any interest on the transferred amount for a stated amount of time, usually at least 12 months. This doesn’t come for free, however. Credit card balance transfers usually charge a transaction fee of between 3% and 5% of the amount you transfer to the new card.
• 0% APR intro card for purchases – If you can charge your medical bill to a 0% APR credit card, it will give you time to repay it (and any other purchases you make during the 0% period) with no added interest. As with the loan, the regular monthly payments will help boost your various credit scores.

How to keep medical bills off your credit report

The best way to keep medical bills from appearing on your credit report is to pay attention to what you owe. A single visit to a hospital can result in multiple account statements that arrive at different times over months; watch them carefully and don’t let any fall through the cracks. Pay each bill as it comes in.

If you can’t pay and have attempted to negotiate with the provider, make a decision to do at least one of the following things to settle the bill:

• Use a credit card or take out a loan.
• Work more and cut expenses to increase your cash flow.
• Sell assets to make money.

Remember that as long as the amount you owe is under the $500 threshold, your credit reports and scores are protected.

Prevent medical bills from hurting your credit score

If the debt goes to a collection agency, which reports it to the credit bureaus, you can contact the collector to pay off the balance. Once the debt is satisfied, the amount can no longer be listed on your credit report. If you don’t have the funds to satisfy the balance, ask if you can pay in installments.

So what happens to a medical bill that has gone to collections, exceeds $500, and remains outstanding? Time may be on your side. Section 605 of the Fair Credit Reporting Act stipulates that this type of debt can only remain on your credit report for seven years, which means it won't hurt you forever.

That said, a collection agency can take legal action against someone who owes it money. How long the agency has to sue you depends on state law. For example, in North Carolina, the statute of limitations for a breach of a written contract is three years, while in Rhode Island, it's 10 years. The clock starts ticking from either the date of your most recent payment or when the breach occurred, whichever was the most recent.

What if insurance didn't or won't pay?

Find out what your insurance plan covers by reviewing your Evidence of Coverage (EOC) document. The policy details can be complicated, so don’t hesitate to call and speak with a representative. They should be able to talk you through the policy.

If you believe the insurance company should have paid a greater portion of the bill, ask your healthcare provider to resubmit it to your insurance company. Mistakes can happen, but you can file an appeal. Don’t delay, though, because there are deadlines noted in the claim correspondence. Be sure to submit supporting documentation, such as medical records and a letter from your doctor, to help your case. The Patient’s Guide to Navigating the Insurance Appeals Process is a free resource provided by the Patient Advocate Foundation; it includes sample appeal letters that you can use.

The insurance company has 60 days to make a decision. You can ask for an independent external expert review if it denies your appeal.

You can also work with a medical billing advocate, which is often a nonprofit organization, to reduce the debt. They may charge a fee, so ask first. In some cases, the amount you pay for its services can be well worth the amount of money you save.

TIME Stamp: Medical bills can affect your credit, so handle them responsibly

The most important thing with debt is to avoid getting into it. Be vigilant about keeping track of and paying your bills. Even so, medical bills can sometimes be overwhelming, even for the most responsible person. Protections exist, so know your rights before you deal with them. It’s crucial to act quickly and not let matters fester.

If you can’t pay your bills, try to negotiate or set up a payment plan. Consider a personal loan or a 0% introductory APR credit card to give you time to settle them. If you can, work additional hours, sell assets, and find ways to reduce your expenses.

You can also dispute your insurance company’s coverage amount. Check your policy’s EOC document to see if the insurance bill meets coverage standards.

Frequently asked questions (FAQs)

Can medical debt be wiped off credit reports?

Medical debt can be wiped from a credit report in a couple of circumstances. If the balance due is under $500, it will not be listed. If the balance exceeds that sum but you have satisfied the bill, it will no longer be listed.

Can medical bills be removed from credit reports due to HIPAA?

The Health Insurance Portability and Accountability Act (HIPAA) may protect you if you have unpaid medical bills. This law regulates patient privacy, including preventing third-party debt collection agencies from accessing your information.

How much does being in collections affect your credit scores?

Unpaid medical debt that exceeds $500 and has been sent to collections is factored into your scores but carries less weight than other types of debt. The credit bureaus no longer list paid medical collection debts, so they aren’t considered in your credit score calculation.

Other collection agency debt is negatively factored into a FICO score, but when reported as paid in full, it is disregarded by the latest versions. Debts with an original amount owing of under $100 are disregarded.

How can I have collection items removed?

To purge your credit report of collection agency debt, you can pay the amount due (which won't remove the account from your credit report but will stop it from factoring into your credit scores) or wait for the account to drop off your credit report after seven years. If you believe the debt to be incorrect, you may dispute the account with the credit bureau. The line item will be removed if it is found in your favor.