Medical debt can be a heavy burden for individuals and families. And knowing unpaid medical bills could impact your credit can make the worry even worse.
In an effort designed to relieve some of the stress on U.S. consumers, the way medical debt is treated by credit bureaus has changed in recent years. The timeline for unpaid health-care bills appearing on your credit reports is longer than it used to be. And some of those debts may not end up affecting your credit at all.
But make no mistake: There still can be consequences if a medical bill goes unpaid for too long.
Read on for a look at when unpaid medical debt can go on your credit reports and some steps you can take to protect and improve your financial health.
Key Points
• Unpaid medical bills can appear on credit reports, but there is a 365-day grace period before they do.
• Medical debts under $500 don’t show up on credit reports.
• Medical collections can stay on credit reports for seven years if unpaid.
• Medical debts paid after they appear on credit reports are removed from the reports, improving credit scores.
• Disputing errors on credit reports can help remove incorrect medical debt information.
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Do Medical Bills Affect Your Credit?
Your medical bills shouldn’t have any effect on your credit, as long as they don’t go unpaid for too long. Most health-care providers don’t report payment activity to the credit bureaus. So unless your account goes unpaid for so long that your provider gives up and sells the debt to a debt collector, it’s unlikely your delinquent account will appear on your credit reports.
Even if the account goes to collections, it can take a year or longer to impact your credit. That’s because the three major credit bureaus (Equifax, Experian, and TransUnion) now give consumers a full 365 days to clear up a medical debt that’s gone to collections before it goes on their credit reports. This year-long grace period allows more time for medical bills to make their way through the insurance approval and payment process, and it gives consumers more time to report billing issues to their provider or the debt collector, negotiate a smaller payment, or set up a payment plan.
More good news: If the initial balance that’s gone to collections is less than $500, the debt won’t ever become part of your credit report, so it won’t affect your credit score.
How Does Medical Debt Impact Your Credit Scores?
Medical bills that you’ve paid shouldn’t appear on your credit reports at all or affect your credit scores — even if you paid the bill after it went to collections. Existing paid medical collections were erased from credit reports in 2022, and the credit bureaus no longer include this information on their reports.
If your bill in collections goes unpaid past the 365-day grace period, however, it could turn up on your credit reports, and possibly have a negative effect on your credit scores. The amount of damage can vary, depending on what scoring model you — or a potential lender — is looking at. But it’s important to note that failing to pay a bill can affect the most significant factor in determining your credit scores — your payment history. So if a medical bill with a starting balance of $500 or more lands on your credit report, you could see a serious dip in your credit scores.
How Long Do Medical Bill Collections Stay on Your Credit Report?
A typical collections account can stay on your credit reports for about seven years, whether or not you eventually pay the debt. But medical accounts are treated differently than other types of debt.
When the credit bureaus are notified that you’ve paid off a medical debt in collections, they’ll remove the account from your credit reports, and you can expect your credit scores to improve.
If you don’t pay the medical debt, however, the collections account could remain on your credit reports for a full seven years after it becomes delinquent.
Can Medical Bills Be Removed from My Credit Report?
If you believe a medical bill in collections is showing up on your credit report by mistake, you can dispute the error with the credit bureau and the debt collector who reported it. After all, it takes time to build credit, and you want to make sure your record represents you accurately.
If your debt has been in collections for less than a year, if the starting balance was less than $500, if the debt has been paid by you or your insurance company, or if you can show that the information is incorrect in some other way, you can take the necessary steps to have it removed from your credit reports.
How to Dispute a Medical Bill on Your Credit Report
To dispute a medical bill on your credit report, the Consumer Financial Protection Bureau (CFPB) recommends starting with the credit bureau that included the account. Explain in writing what you think is wrong and why — and be sure to include documentation that supports your claim. The credit bureaus can then begin an investigation. (The CFPB provides sample letters and addresses for the credit bureaus.)
You should also reach out in writing to the debt collector that furnished the information and ask that it be corrected.
Finally, if your dispute continues to go unresolved, you can submit a complaint to the CFPB.
Recommended: Why Did My Credit Score Drop After a Dispute?
How Can You Check for Medical Debt on Your Credit Reports?
There are a couple of ways you can check your credit report to see if a medical debt is showing up there.
• If you’re paying for credit monitoring, or if your financial institution or credit card company provides a free credit score and summary each month, the information you’re looking for may be available as part of this service. You may even receive an alert if your credit score updates and there’s a significant drop.
• You’re also entitled by federal law to receive free copies of your credit reports from the major credit bureaus at AnnualCreditReport.com.
Don’t panic if a debt collector tells you that your unpaid account will soon affect your credit scores. Remember that you have a year-long grace period to pay the debt or clear up any errors before the account will show up on your credit reports.
Does Paying Off Medical Collections Improve Your Credit?
The best way to keep medical debt from dragging down your credit scores is to make sure your bills are paid on time (by you or your health insurance company). Even if your account goes to collections, paying is still an option — and it can help push your credit scores back up.
Though the negative impact of having a collections account on your credit report diminishes with time, if the bill goes unpaid, it could sit on your record — where lenders can see it — for seven years.
Recommended: How to Build Credit
What If You Can’t Pay Your Medical Bills?
Even though it may be tempting, the worst thing you can do if you have medical debt is ignore it. Here are some options to consider if you’re wondering how to pay medical bills you can’t afford.
Ask About a Repayment Plan
Many hospitals and health-care providers will let you set up a payment schedule that allows you to pay over time. Best-case scenario, the option provided is fee- and interest-free. If you’re asked to sign up for a financing plan that will cost extra, make sure the terms work for you and that it’s still manageable within your budget.
Try Negotiating with Your Provider to Lower Your Bill
Sometimes, a health-care provider may be willing to accept a lower amount to avoid writing off the bill and selling the account to a debt buyer. (Even if the account has gone to collections, you may be able to settle for a lower payment. At that point, though, you’ll likely be negotiating with the debt collector, not the original creditor.)
See If You Qualify for Financial Assistance
Grants and other types of financial assistance are sometimes available for patients who are eligible based on their income, age, or other factors. A Google search may turn up some options, or your health-care provider or a support group may be able to pass along information.
Consider an Unsecured Personal Loan
If you can get manageable monthly payments and other terms that fit your needs, you may want to consider taking out a low-interest personal loan. Try to stay away from a loan that’s secured by your home or other assets, which could end up putting your financial well-being at greater risk if you default.
How Can You Keep Your Credit Scores Healthy Despite Challenging Medical Bills?
Small fluctuations in your credit scores are normal, but if you’re worried that an unpaid medical bill could cause a drastic drop, it’s important to keep your financial guard up. Here are some steps you can take to protect your scores:
Keep Paying Your Bills on Time
Your payment history is a big factor in determining your credit score, so do your best to stay on top of all your bills. If making timely payments is a struggle for you, you may find a spending app can help with budgeting, keeping track of billing due dates, and prioritizing payments.
Watch Your Credit Utilization
Lowering your credit card utilization ratio — the percentage of available credit that you’re using on your credit cards and other lines of credit — can help you get and keep your credit scores where you want them. If you’re relying heavily on credit to get by, and you’re close to maxing out your credit cards, you may need to reevaluate your spending and change up your budget. A money tracker app could help you stick to healthy financial habits.
Monitoring Your Credit Scores
Even if you’re on your best behavior, if an unpaid medical bill ends up on your credit report, it may take months before you see some improvement to your damaged credit scores. Credit score monitoring can help you better understand how certain actions can affect your creditworthiness.
The Takeaway
Watching your medical expenses pile up can be stressful — especially if you’re worried that your unpaid medical bills can go on your credit reports and lower your credit scores. Fortunately, the credit bureaus and credit score models have begun treating medical debt with a little more patience and consideration than other types of debt.
But an unpaid medical account still can be a problem if you let it go for too long. So it’s important to stay on top of your medical bills, along with all your other financial obligations.
Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.
FAQ
Can unpaid medical bills affect your credit?
A medical bill will likely only affect your credit if it’s been unpaid for so long that it ends up going to collections. Even then, consumers have a full year to clear up a medical collections account before it goes on their credit reports. But if the bill goes unpaid after that grace period is up, it could affect your credit scores.
How do I remove a medical collection from my credit report?
To have a medical collection removed from your credit report, you can either pay the amount you owe or — if you think it’s in error — you can try disputing the bill with the credit bureau and the debt collector that reported it.
Is it a HIPAA violation to send medical bills to collections?
Not necessarily. The Health Insurance Portability and Accountability Act (HIPAA) has strict standards for how health-care providers and their business associates, including third-party debt collectors, handle sensitive personal health information. Debt collectors can receive and disclose information but only to the extent that it is absolutely necessary to perform their job.
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