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Understanding the Impact of Medical Bills on Your Credit

Medical care is essential for maintaining good health, but expensive medical bills can strain your finances. According to recent estimates from the Peterson Center on Healthcare and Kaiser Family Foundation (KFF), over 3 million people owe more than $10,000 in medical debts, with millions more carrying smaller amounts.

Do Medical Bills Hurt Your Credit?

Medical bills won’t affect your credit as long as they are paid. However, unpaid medical debt is treated differently from other types of consumer debt. Most healthcare providers don’t report to credit bureaus, so your debt must be sold to a collection agency before it appears on your credit report. Typically, medical providers wait 60, 90, or even 120 days before selling the debt, depending on the provider.

Even after your bill goes to collections, it may not show up on your credit report immediately. The three main consumer credit bureaus—Experian, TransUnion, and Equifax—provide a 365-day waiting period to resolve any medical debt before it appears on your credit history. Starting March 31, 2023, medical collections under $500 will no longer be included in your credit report, so those accounts won’t hurt your credit score.

Can Medical Bills Be Removed From My Credit Report?

If you have medical collections on your credit report that are inaccurate or the result of fraud, you have the right to dispute them with the credit bureaus. Contact the collection agency and the medical provider as well. If the dispute is resolved in your favor, the accounts can be updated or removed from your credit report. Be prepared to provide evidence, such as records from the collection agency, insurance company, or healthcare provider.

Does Paying Off Medical Collections Improve Credit?

Paying off legitimate medical debt can significantly impact your credit scores. Unpaid medical collection accounts over $500 can appear on your credit reports and affect your scores for up to seven years. However, once the debt is paid, the account will be removed from your credit reports, which can positively impact your credit score.

What to Do if You Can’t Pay Your Medical Bills

If you can’t pay your medical bills on time, consider the following options:

• Negotiate your medical bills: Healthcare providers may offer discounts if you agree to pay a lower amount in full or make a large down payment and pay the rest over time.
• Set up a repayment plan: Breaking the bill into monthly payments can make it more manageable. Be aware of any interest or fees that may be added.
• Hire a medical billing advocate: These professionals can help resolve medical bills on your behalf, potentially saving you money and time.
• Seek financial assistance: Depending on your income, you may qualify for help from Medicaid, local or state programs, religious groups, nonprofit organizations, or charities.
• Use a personal loan or credit card: These should be last resorts due to interest charges. Consider a credit card with a 0% APR introductory offer to pay off the debt without interest, but aim to pay it off before the higher rate applies.

Keep Your Credit Score Healthy

Even with a collection account on your credit report, you can still improve your credit score. Make all debt payments on time, keep credit card balances low, and avoid applying for new credit unless necessary. Regularly check your credit report and score to spot any medical debt in collections or fraudulent activity. You can get a free copy of your credit report from all three credit bureaus through AnnualCreditReport.com. Once medical debt is paid off, ensure it no longer appears on your credit report.

For any mortgage-related needs, call O1ne Mortgage at 213-732-3074. We’re here to help you navigate your financial journey with confidence.

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