When you need medical care, you want to focus on healing, not bills. But it is also important to understand how medical bills affect your credit score.
When you pay your medical bills on time, they won't affect your credit score at all. If you don't pay, your medical bills will go to collections, which can lower your score. However, they have a smaller impact on your score than other types of debt.
Learn more about exactly how medical bills affect your credit score, as well as what you can do to minimize their impact.
How Medical Bills Affect Your Credit Score
Medical bills will only affect your credit score if you don't pay them on time. But given the high costs of medical care, you may not be able to pay them right away. Even if you can't pay your bills immediately, you will have some wiggle room, thanks to an extra grace period.
Continue reading to learn more, including how to minimize the impact of your medical bills on your credit score.
Can Hospital Bills Affect Your Credit?
Just like any other type of medical bill, hospital bills can affect your credit. The important point here is that for them to affect your score, they have to be unpaid. If you pay your bills right away or by the payment deadline, they won't affect your score.
Medical Bills Are Treated Differently Than Other Unpaid Debt
The good news is that debt from medical bills is treated differently than other types of unpaid bills. This gives you a better chance of preventing it from affecting your credit score. There are three important aspects to this special treatment, each of which benefits you and your credit score.
Your Provider Probably Won't Report the Debt
To start, the majority of health care providers do not report your medical bill debt to the credit bureaus. This is important because debt only appears on your report and therefore affects your score if it gets reported.
That means that you will have some time to work out a payment plan with your health care provider. You can theoretically work with them to reduce the bill and start paying it off at any point before they send it to collections.
They Likely Won't Sell the Debt Immediately
The timing of selling your debt to collection agencies is also good news. Simply put, most medical providers wait at least several months, if not more, to sell your debt to a collection agency. Every health care provider is different, but it is common to wait 60, 90, or 120 days after the due date passes.
Remember that this is a generalization, and it varies by health care provider. You will have to contact your provider to see how long you have to pay the debt before it goes to collections.
You Get a Grace Period After the Bill Goes to Collections
For most types of debt, as soon as it goes to collections, it will show up on your credit report. But that is not the case for medical debt. All three major credit bureaus will wait 180 days before the collection account appears. They give you this time to resolve the debt with the collection agency.
Learn More: Levelcredit: What Is It?
Medical Debt Has a Smaller Impact (On the Newest Scoring Models)
Yet another way medical debt is treated differently is the extent of its impact on your credit score. On the most recent scoring models, medical debt weighs less than other collections.
This is the case with the VantageScore 3.0 and 4.0 models and the FICO 9 model. Older models, however, will weigh medical debt the same as other debt in collections.
This means that if your lender uses a newer scoring model, your medical debt will not bring down your score as much. Importantly, you won't know which model your lender uses, so don't assume that this is always the case.
Why Is Medical Debt Featured Differently?
While you likely appreciate the special treatment that medical debt gets compared to other types of debt, you still want to understand it.
The bottom line is that medical bills are different from other types of debt. There are two main differences that influence this decision:
- The process of your insurance company approving payment can take months. This means that your bill may appear unpaid for months until your insurance company pays it. Or it means that you may need to wait months until you know how much you have to pay out of pocket.
- A simple error with billing or coding can cause extra delays.
Simply put, the combination of the grace period and other special treatment gives you extra time to deal with these delays.
The unique treatment of medical debt also acknowledges that medical debt doesn't indicate a credit risk in all situations. Other types of debt can typically indicate a poor financial decision, but medical debt is usually out of the control of the person holding the debt. Lenders and credit bureaus recognize that most people are just one unforeseen accident away from medical debt.
Do Unpaid Medical Bills Affect Your Credit?
Yes, unpaid medical bills will affect your credit. But you will not notice an impact right away. Your health care provider will likely wait at least 60 days (if not 90) after the due date to send your bill to collections. From there, you should have 180 more days until it appears on your credit report.
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How Long Do Medical Bills Stay on Your Credit Report
As with any other debt on your credit report, medical bills will disappear after seven years. This is the case even if you still have not paid the bill.
Remember that even if an unpaid medical bill drops off your credit report after seven years, you may still be liable to pay it. Collection agencies can take you to court to have you pay outstanding bills. There is a statute of limitations on this, though. It is typically three to six years. In other words, the statute of limitations for the collection agency to take you to court to pay will likely have expired by the time your medical bill drops off your report.
Can You Dispute Medical Bills?
If you notice a medical bill on your credit report that shouldn't be there, you can dispute it. It is free to file disputes, but you will have to file one with every bureau that has the error. You will also have to provide evidence. Examples of evidence include credit card statements, canceled check copies, and records from your insurance company.
What Happens to Your Credit Score When You Pay Off Medical Debt?
Yet another special treatment that medical bills get is what happens to them once you pay them off. Most types of collections will stay on your credit report for seven years, even if you settle them.
However, once you pay the medical debt in collections, it will be removed from your report. This is the case whether you are the one to pay it off or your insurance company did.
How to Minimize the Impact of Medical Debt on Your Credit Score
One of the most important ways to minimize the impact of medical debt on your credit score is to ensure it gets paid and that it is accurate.
Get in the habit of reviewing your medical bills as soon as you get them. If there are any mistakes, address them.
Work with your insurance provider to ensure that the bill gets paid. Then, remember to confirm that your health care provider has settled the bill.
Additionally, make sure that you know how much you owe. Ask for proof that this is the amount of your medical bill. You can even ask the medical provider for a breakdown of the costs. When you look at this information, have your explanation of benefits from your insurance company handy. Use that to confirm that the insurance company covered the costs it was supposed to.
If you have out-of-pocket costs after your insurance provider pays, settle them as soon as you can. If you don't have the funds to pay them immediately, talk to your medical provider. You can likely get the bill reduced or work out a payment plan. Remember, if they don't send the bill to collections, it is unlikely to affect your credit report.
If you do make a payment plan with the medical provider, get documented proof of this. That will let you dispute the debt if they report it to the bureaus, assuming you make the agreed-upon payments.
You may also see results by hiring a medical billing advocate. Depending on your financial situation, you may also qualify for medical financial assistance.
Should You Pay Medical Debt Off With a Loan or Credit Card?
Do not use your credit card or take out a loan just to pay off medical debt. While this may make sense in incredibly rare situations, that is not usually the case. You would lose the extra benefits that come with medical debt, such as the fact that it disappears from your credit report as soon as it is paid. Additionally, most medical debt won't carry high-interest fees or late fees, both of which are almost always the case with loans or credit card debt.
As long as you pay your medical bills, they will not affect your credit score at all. If you cannot pay them, your medical provider will likely wait at least 60 days, if not longer, to send them to collections. From there, you have a 180-day grace period before the collection appears on your credit score. At this point, the medical collections will negatively affect your credit score. However, it will do so to a lesser extent than other types of collections accounts.
- Paying Off Collections: Does It Improve Your Credit Score?
- Medical Debt Forgiveness Act – What It Is & What It Does
Shawn Manaher is a former financial advisor, has founded 5 online businesses, and is a coach, speaker, podcast host, and author. He's been featured on Forbes, The Consults Corner on TAE Radio, The Writing Biz, What's Your Story, and more.