Medical debt can be painful, even more so when it hurts your credit. And, yes, you heard that right, unpaid medical bills can wind up affecting your credit scores. Doctors or hospitals don’t usually report debts to credit reporting agencies. Instead, they turn their unpaid bills over to a debt collector, and it is the collection agency that reports them. The damage done by medical collections can be significant. In fact, just one collection account can cause a good credit score to drop 50 to 100 points. And, while that score should steadily improve over time (assuming no new negative information, that is), collection accounts, including medical debts, can remain on your credit report for 7 years plus 180 days from the date of the original delinquency. That’s true of unpaid and paid accounts, though there are a few emerging exceptions (more on that below). Here’s more on how medical debt can impact your credit score.
Will a Medical Debt in Collections Really Hurt My Scores?
You have many different credit scores, not just a single one. Even among the widely known FICO scores, there are many different versions. The newest version of the FICO score, FICO 9 — ignores paid collection accounts, and medical collection accounts carry less weight under that model. VantageScore 3.0 also ignores paid collection accounts of all types.
But most lenders still use older versions of credit scores that do not give medical collections any special treatment. For that reason, you should assume that if you find a collection account on your credit report, it will likely be viewed negatively when you apply for credit, insurance or employment.
Keep an Eye Out for Medical Debts
Medical debts impact more Americans’ credit than you may think. According to a 2014 report from the Consumer Financial Protection Bureau, a whopping 52% of all debt on credit reports was related to medical expenses and 43 million Americans had unpaid medical debt on their credit files. One survey by Credit.com found that 10% of those who reviewed their credit reports discovered a collection account they didn’t know about.
That’s why it’s critical that you review your credit reports annually, and monitor your credit scores on a regular basis. (Think of it as a checkup for your credit health.) You can get a free credit report snapshot and two free credit scores, updated every 14 days, on Credit.com.
How to Maintain Healthier Credit
So what can you do about your medical debts? Here are few steps you can take.
- Stay on top of your medical bills: Thanks to co-pays, deductibles and other insurance quirks, many medical debts go unpaid simply because a person doesn’t know they owe. Make sure to follow up with your health care provider or insurance company after doctor or hospital visits to see if you have a balance. Even if you have good health insurance, don’t assume everything will be taken care of. (Something else important to note: Under a settlement that 31 state attorneys general negotiated with Equifax, Experian and TransUnion back in 2015, the three major credit reporting agencies agreed not to report medical debt until 180 days after it was incurred. The change is meant to give people more time to resolve medical bills with health care providers and insurance companies.)
- Review your EOBs: Read your Explanation of Benefits carefully and contact the provider and/or your insurance company quickly if a bill is not being taken care of.
- Ask for an itemized bill: This will help you verify that you’re being charged correctly and provide an opportunity for you to negotiate payment with the health care provider.
- Negotiate with collectors: If you are contacted by a collection agency about a medical bill, ask them not to report it if you pay it right away (assuming you believe you owe the bill). Some won’t report if the bill is resolved quickly.
Again: Having a collection account updated as “paid” generally does not help your scores, unless a lender is using one of the newer credit score versions. So aim for removal of the item if possible. Some agencies will work with you, others won’t.
If you feel the situation is highly unfair — you never got a copy of the bill, for example — you can try two things. One is to file a complaint with the Consumer Financial Protection Bureau. The other is to contact the original provider and try to get them to pull it back from collections so you can pay them directly. If they do, the account will usually no longer be reported.
If you are contacted by a collection agency and you don’t believe you owe the bill, you have the right under the federal Fair Debt Collection Practices Act to ask the collection agency to validate the debt. You also have the right under the Fair Credit Reporting Act to dispute it with the credit reporting agencies reporting the account.