How Do Unpaid Medical Bills Affect Your Credit Score?

Unpaid medical bills are treated differently from other outstanding debt, but they can still impact your credit score.
Last updated Sep 21, 2020 | By Liz Alterman
Woman in a hospital gown sitting in an examination room

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If you’re buried beneath mounting medical debt and struggling to pay it, you may be suffering from a new pain point — panic as you wonder how unpaid medical bills affect your credit.

Though it’s little comfort, you’re not alone. According to a 2016 report by the Kaiser Family Foundation, 26% of Americans have had problems keeping up with their medical bills.

Here’s what to expect if you have trouble paying your medical bills, and what it could mean for your credit score.

How do medical bills affect your credit report?

Unlike other forms of debt, such as auto loans or credit cards, failure to pay medical expenses won’t send healthcare providers rushing to report unpaid expenses directly to credit bureaus. Instead, they turn that debt over to a collection agency, which will then contact you directly to seek payment.

If you fail to pay up, the collection agency will alert the three primary credit reporting agencies — Experian, Equifax, and TransUnion — which means your unpaid debt will show up on your credit report.

Does this mean your credit score will take an immediate hit? Not necessarily. For those with healthcare-related debt, the three major credit bureaus honor a grace period that buys individuals a bit more time pay off those bills.

Experian Director of Consumer Education and Awareness Rod Griffin explains that once medical debt goes into collection, credit reporting agencies wait 180 days before adding it to a credit report.

“This helps ensure that it’s not a result of billing error and that it’s a legitimate expense and really should be reported,” says Griffin.

“When you’re in the hospital, you might get one bill for the doctor, another for the anesthesiologist, more for the nursing staff,” he adds. “It all gets confusing. Sometimes bills and payments cross in the mail. This protects consumers and gives them time to make sure everything’s as it should be.”

That means those with medical debt have a full six months to clear up billing or insurance issues, begin making payments, or negotiate a payment plan that will allow them to start whittling down that debt before it appears on a credit report.

“Compare that to credit card delinquencies, for example, that can get reported to credit bureaus in just one to two months after the first missed payment,” points out Uri Abramson, personal finance expert and co-founder of OverdraftApps.

Providing consumers additional peace of mind, Griffin adds that personal medical information doesn’t become part of your credit history or ever enter into the report. So consumers needn’t worry about potentially being denied a loan down the road because of their health or medical history.

Medical debt is weighted differently in new credit scoring models

In addition to the 180-day grace period, recent changes to credit scoring models can lessen the impact of unpaid medical bills on your credit score.

Leslie H. Tayne, a consumer debt attorney, explains the reasoning behind this shift.

“Because medical debt is different from other debt in the sense that you were not making a conscious decision to charge a credit card or take out a loan, newer scoring models have adapted,” she notes. “Many scoring models now weigh medical debt less heavily than consumer debt when determining your credit score.”

Griffin adds that the newest credit scoring systems, such as FICO 9, essentially ignore a paid medical collection — so once you pay your doctor’s bill in full, it no longer impacts your credit.

However, consumers must keep in mind that not all financial institutions are currently using FICO 9, Abramson cautions. “In fact, the previous FICO 8 version is still used much more widely,” he says.

Medical bills affect your credit score if they remain unpaid

While they might carry less weight, unpaid medical bills affect your credit negatively, Tayne notes, adding that your credit score can drop “up to 50-100 points.”

Jeff Richardson of VantageScore Solutions says that figure is “in the right ballpark” but notes there are a few other factors at stake:

  • Only unpaid medical debt that goes into collection is factored. A bill sent out by a medical facility is not calculated.
  • Collections less than $250 are not as impactful as collections over $250.
  • After the collection has been paid off, most newer credit scoring models will not penalize you any further.

Like other debt, unpaid medical bills remain on your credit report for seven years from the original delinquency date.

“Technically, it’s six years and six months,” Griffin points out. “So they can and do affect your credit score. But the further in the past and the older it becomes, the less it impacts scores as well.”

Once your debt is paid, check your credit report

As soon as you pay off your medical bills, you want to be sure your credit report and credit score reflect this new information.

“It’s advisable to order your credit report from all three major bureaus,” says Tayne. “If the debt was in collections, it will no longer be and that should be reported on your credit reports. And your credit score will begin to improve once again, given that you’re keeping up with your other accounts.”

What to do if you can’t pay your medical bills

If you know that even after tightening your belt you won’t be able to keep up with your medical bills, consider the following steps you can take before the debt makes its way onto your credit report:

  • Check your bill carefully: “Ask for an itemized copy of your medical bill and make sure that you received each service you’re being charged for,” Tayne advises. “Additionally, double check with your insurance company that you’re getting as much coverage as possible. Insurance billing codes change frequently, so errors are not uncommon and could be costing you more than you should be paying.”
  • Negotiate: It’s possible to negotiate medical debt. “You can work on your own or with a debt settlement professional to attempt to negotiate your medical debt for less than you owe,” says Tayne. “Like with other debts, the idea is that the provider would rather receive a portion of your debt than none of it. If you’re considering this process, however, it’s best to begin as early as possible to avoid the account being sent to collections.”
  • Set up a payment plan: “Call the hospital or provider and ask them about repayment options; it’s not uncommon for those providers to offer you interest-free payments based on what you offer to pay them,” says Tayne.
  • Discuss any hardship: If you have a verifiable financial hardship, you may be eligible for medical debt forgiveness. The provider will ask for documentation to prove your hardship and determine your eligibility.

Don’t be afraid to dispute inaccuracies

If an unpaid medical debt becomes part of your credit report and you believe some or all of it is inaccurate, you can dispute online or by mail or phone with TransUnion, Experian, and Equifax. This forces the collection agency to validate the debt.

“The overwhelming majority of disputes are resolved within the first 10 days, but by law the dispute resolution process can take up to 30 to 45 days depending on the circumstances,” says Eric J. Ellman, senior vice president for public policy and legal affairs at the Consumer Data Industry Association.

Once the dispute is resolved, the consumer receives updated information based on the outcome of the reinvestigation process, which may be “accurate as reported,” “the item has been removed,” or “the item has been modified,” Ellman explains. If the consumer is not satisfied, they may put a 100-word statement on their credit report further explaining the situation.

Unpaid medical expenses can cause financial and emotional stress resulting in struggles with how to manage your money. But changes to regulations give people additional time to address possible errors, negotiate lower balances, or set up payment plans that may keep their credit score as healthy as possible.

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