Does having medical debt negatively impact your credit rating?

In the U.S., medical debt is a widespread problem, with approximately 41% of Americans carrying some form of healthcare debt, as per a 2022 report from the Kaiser Family Foundation. If you are among this group, you may be concerned about how your medical bills could impact your credit score.

While healthcare debt may not have as significant an impact on your credit as other types of debt, it can still affect your credit score if it is sent to a collection agency. CNBC Select provides guidance on how medical bills can impact your credit score and offers suggestions for managing this type of debt.

Do medical bills affect your credit?

How medical debt can impact your credit score

As long as you settle your healthcare bills promptly, they won't negatively impact your credit score. Generally, medical providers do not report unpaid bills to credit bureaus, so you don't need to worry about your credit being affected.

If your healthcare bill is significantly past due, the provider may sell it to a debt collector. The timeframe for this can vary depending on the healthcare office's practices, but generally, it occurs after 90 days of non-payment. Some providers may give you only 60 days, while others may wait 180 days before turning your debt over to a collector.

Not all unpaid medical debt will be reported on credit reports. Starting from April 2023, the three credit bureaus, Experian, TransUnion, and Equifax, have removed all unpaid medical debt with an initial balance below $500 from credit reports. Additionally, any new medical collections under $500 will not be included in credit reports.

If your medical debt exceeds $500, you have a year to resolve it. The credit bureaus grant a 365-day waiting period before unpaid medical collections are reported on your credit record. During this time, you can work with your insurance company or explore other payment options to settle the debt. Fortunately, paid medical collections do not affect your credit score.

If you don't pay collectors, the collection account will remain on your credit profile for seven years and harm your scores.

How to check for medical debt on your credit report

Don't wait for a debt collector to confirm your fears about medical debt on your credit record.

You have the right to obtain a free credit report from each bureau annually, and you can access free weekly credit reports at AnnualCreditReport.com.

Capital One's CreditWise® service can be used to monitor credit accounts and balances on a TransUnion credit report, including closed accounts and collections, even if you are not a Capital One cardholder. CNBC Select recommends this service as an alternative to free credit monitoring services.

Experian's Dark Web Scan and Credit Monitoring service is a great choice. It's free and you receive a new Experian credit report every 30 days.

Ensure that any medical collections on your credit report are accurate and belong to you. Any debt under $500 and less than one year old should not be included on your record. If you discover any incorrectly reported medical debt, you have the right to dispute it and potentially have it removed.

If the debt is legitimate, the only way to handle it is to pay it off.

What to do if you have medical debt

No matter if you've recently received an unaffordable bill or it's already been sent to collections and negatively impacted your credit score, there are ways to regain control of your finances.

• Before your healthcare bill goes to collections, discuss a payment plan with your provider.
• A medical billing advocate can help you save thousands of dollars by negotiating your medical bills with insurance companies and healthcare providers for a fee.
• You may be eligible for financial assistance from various sources, including income-driven hardship plans, federal, state, or local programs, or non-profit organizations.
• Your healthcare provider may offer a discount for paying in full or allow you to make a down payment and pay the remaining balance over time. If your bill is already in collections, you can negotiate with the collection agency since they most likely bought the debt for a fraction of its original value.
• Consider a 0% APR credit card to avoid accruing interest on your balance for a limited time. However, be cautious and develop a solid repayment plan to avoid turning your medical debt into regular debt, which will negatively impact your credit scores.

Bottom line

Your financial well-being can be put at risk by the high cost of medical debt. Although you may have some time to settle your medical debt before it negatively impacts your credit, it's crucial not to let the situation escalate. Collaborate with your healthcare provider to explore payment plan options, and if necessary, use a 0% APR credit card to help manage your debt.

Why trust CNBC Select?

Our goal at CNBC Select is to deliver top-notch service journalism and in-depth consumer advice to our readers, enabling them to make well-informed decisions when it comes to their finances. Each of our credit guides is the result of thorough reporting by our team of experienced writers and editors, who possess extensive knowledge of credit monitoring products. At CNBC Select, we take pride in our commitment to journalistic standards and ethics, and we earn a commission from affiliate partners on many offers and links. However, our content is created independently, without any input from our commercial team or external third parties.

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