Medical Debt and Credit Scores: What You Need to Know

Your medical history isn’t part of your formal credit history, but unpaid medical bills can affect your credit score. Over 43 million Americans have a negative payment history involving medical debts on their credit report.

According to a 2014 study by the Consumer Financial Protection Bureau, half of all debt on credit reports is medical-related. In fact, over 43 million Americans have negative payment history involving medical debts reported on their credit.

According to the CFPB report: " Medical debt is incurred differently than other unpaid bills, such as unpaid phone or utility bills. Medical debt can result from an event that is unpredictable and costly, such as an accident or sudden illness. In addition, consumers are often temporarily responsible for the whole bill until insurance works it out. Consumers can also become responsible for medical debt because of billing issues between medical providers and insurers. Complaints to the CFPB indicate that many consumers do not even know they owe medical debt until they get a call from the collections agency or they discover it on their credit report."

Medical Collections

When you leave medical bills unpaid, the medical office usually sells them to debt collection agencies. At that point, you’ll have 180 days until the medical collections damage your credit score. This is a grace period added in 2017, giving more opportunity to resolve issues and arrange payments. Otherwise, the bad marks can remain on your score for up to 7 years.

Healing your Score

The good news is that some scoring formulas, like Vantage and FICO scores, give less weight to medical debts.

When paying off your medical bills, make sure your credit report is reflecting the changes. Keep up with your balance, and watch out for bills you can dispute.

If you need help paying off medical debts get in touch with us at DebtKO to find out how our debt relief programs can help you.