Does Medical Debt Affect Your Credit Score ?


Medical emergencies are stressful enough without worrying about the financial burden they leave behind. Unfortunately, unpaid medical bills can significantly impact your credit score, making it harder to qualify for loans, rent apartments, and even get certain jobs. But how exactly does medical debt affect your credit, and what can you do to minimize the damage? Let's break it down.

Does Medical Debt Always Hurt Your Credit?

The good news is that not all medical debt carries the same weight. Here's a breakdown of how medical bills can impact your credit score:

On-time Payments: As long as you pay your medical bills on time, they won't be reported to credit bureaus and won't affect your credit score. This applies to both directly billed amounts from hospitals or clinics and those covered by insurance with remaining patient responsibility.

Unpaid Bills Under $500: Thanks to a recent change, unpaid medical collections under $500 won't be included on your credit report. This is a welcome relief for those facing smaller medical debts.

Unpaid Bills Over $500: If your medical debt surpasses $500 and remains unpaid, it can be sent to collections after a certain period (typically 60-120 days depending on the healthcare provider). Once it reaches collections, it will be reported to credit bureaus and negatively impact your credit score.

How Can Medical Debt Hurt Your Credit Score?

Unpaid medical collections can significantly lower your credit score in several ways:

Delinquency: Late payments and collections stay on your credit report for seven years from the original delinquency date, dragging down your score throughout that period.

Debt-to-Credit Ratio: Medical debt contributes to your overall debt utilization ratio, which is the percentage of available credit you're using. High Debt-to-Credit utilization (over 30%) negatively impacts your score.

Negative Marks: Collection accounts are reported as negative marks on your credit report, further lowering your score.

What You Can Do About Medical Debt and Your Credit Score

If you're facing medical debt, don't panic! Here are steps you can take to minimize the damage and improve your credit score:

Negotiate Bills: Contact your healthcare provider or insurance company to discuss a payment plan or negotiate a lower amount. Explain your financial hardship and see if they can offer any assistance.

Pay Off Debt: Prioritize paying off your medical debt, especially collections, to remove the negative marks from your credit report. Consider a debt consolidation loan or a balance transfer credit card (if you qualify for a lower interest rate) to streamline payments.

Dispute Errors: Review your credit reports regularly (you can get free copies from each bureau annually) and dispute any errors you find, including inaccurate medical debt information.

Consider Medical Credit Repair Services: For complex situations, consider seeking help from a reputable credit repair service specializing in medical debt. However, be cautious and choose a legitimate company that works within legal boundaries.

Additional Tips for Managing Medical Debt and Your Credit

Communicate Early: If you anticipate difficulty paying a medical bill, contact your provider as soon as possible. They may offer payment plans or financial assistance programs.

Maintain Good Credit Habits: Practice responsible credit card usage by making timely payments and keeping your overall credit utilization low. This will help offset the negative impact of medical debt.

Build Positive Credit History: If you have limited credit history, consider getting a secured credit card and using it responsibly to build positive credit over time.

Remember: Medical debt is a common issue, and there are ways to manage it and protect your credit score. By taking proactive steps and seeking help when needed, you can overcome this challenge and achieve your financial goals.

Call on (888) 804-0104 to know more about your credit score now!