Warning: Medical Debts CAN Hurt Your Credit

Published

June 26, 2012

Contributing writer for Credit.com, Chris graduated with honors from the Columbia University Graduate School of Journalism, and has reported for a number of publications including The New York Times, TIME magazine and Popular Mechanics.

If you think unpaid medical bills and hospital debts can’t hurt your credit score, you’re certainly not alone. As a Credit.com reader using the screen name “Don Murray” recently wrote to us, he’s been “told by many sources that medical/hospital collections don’t affect one’s credit score,  however I can’t find anything definitive online.”

It certainly makes sense that medical bills should be excluded. After all, a credit score is used to predict whether you’re a reliable person who will repay your debts. But medical bills often come suddenly, without warning, and can quickly escalate from a minor charge to a major expense. One could argue — and many do — that an unpaid medical bill doesn’t necessarily mean that a person is a poor credit risk.

“Medical debt is unique, and Americans do not choose when accidents happen or when illness strikes,” according to the text of House Bill 2086, introduced in Congress last year to wipe medical debts that have been repaid from consumers’ credit reports.

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However, the legislation didn’t pass. Which means that unpaid medical bills will hurt your credit score just like any other kind of unpaid debt.

“When a medical debt is outsourced to a third-party collection agency, it is treated the same as other debts that are in collection,” Jeff Richardson, a spokesman for VantageScore Solutions, told Credit.com in March.

In fact, a single unpaid bill of any kind, including a doctor’s bill, could damage a nearly-perfect credit FICO credit score of 780 by 105 to 125 points, according to recent reporting by Gerri Detweiler, Credit.com’s consumer credit expert. That’s enough to prevent a consumer from getting the best interest rate on credit cards, mortgages and other forms of credit, potentially costing them a good deal of money in extra interest charges.

The upshot is this: It doesn’t matter if it’s a credit card or an unpaid medical bill. Unpaid debt is unpaid debt. And it will hurt you all the same.

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Image: Cameron Parkins, via Flickr