How Medical Debt Affects Credit Scores and What You Can Do
Understanding the Impact of Medical Debt on Credit Scores
Medical debt can significantly impact your credit score, often in ways that differ from other types of debt. Unlike credit card or loan payments, medical bills may not immediately appear on your credit report. However, if left unpaid, healthcare providers may send the debt to collections, which can then be reported to credit bureaus. Once a medical debt is in collections, it can lower your credit score, making it harder to secure loans, mortgages, or even rent an apartment. The impact varies depending on the credit scoring model, but even a single unpaid medical bill can cause long-term damage.
Another key factor is the timing of when medical debt appears on your credit report. Some credit scoring models, like FICO 9 and VantageScore, treat medical debt differently than other collections, giving it less weight. However, many lenders still use older models that penalize medical debt harshly. Additionally, medical debt can stay on your credit report for up to seven years, even if you eventually pay it off. This prolonged negative mark can affect your financial opportunities for years.
The emotional and financial stress of medical debt can also lead to missed payments on other bills, further harming your credit. Many people delay paying medical bills due to disputes with insurance companies or financial hardship, unaware that this can escalate into a credit issue. Understanding how medical debt is reported and scored is the first step in protecting your financial health.
Strategies to Protect Your Credit from Medical Debt
One of the best ways to prevent medical debt from damaging your credit is to address bills promptly. If you receive a medical bill, review it carefully for errors and contact your healthcare provider or insurer to resolve any discrepancies. Many hospitals and clinics offer payment plans or financial assistance programs for those who qualify. Negotiating a manageable payment schedule can keep the debt from being sent to collections.
If your medical debt has already gone to collections, act quickly to minimize the damage. Some collection agencies may agree to remove the negative mark from your credit report if you pay the debt in full. You can also request a "pay for delete" agreement, though not all collectors will comply. Additionally, newer credit scoring models may ignore paid medical collections, so settling the debt can still improve your score over time.
Proactively managing your credit is another key strategy. Regularly check your credit reports from all three major bureaus—Equifax, Experian, and TransUnion—to ensure medical debts are reported accurately. If you find errors, dispute them immediately. Building an emergency fund can also help cover unexpected medical expenses before they become debt. By staying informed and taking action early, you can protect your credit from the long-term effects of medical debt.