Does medical debt affect your credit score?
Medical debt can be a heavy burden — but it doesn't have to weigh down your credit scores.
Medical debt is a prevalent issue in the U.S. An estimated 41% of Americans have some sort of healthcare debt, according to a 2022 report from the Kaiser Family Foundation. If you also belong to this group, you may worry about the effect your medical bills can have on your credit.
Fortunately, healthcare debt doesn't carry as much weight as other types of debt and it usually doesn't affect your credit unless it's sent to a collection agency. CNBC Select explains how medical bills can influence your credit score and what you can do if you're dealing with this type of debt.
Do medical bills affect your credit?
How medical debt can impact your credit score
Fortunately, your healthcare bills won't harm your credit, as long as you don't wait too long to settle them. Most of the time, you're dealing with the medical provider directly and they aren't likely to report your payment activity (or lack thereof) to the credit bureaus. This means that while you owe the provider, your credit report won't reflect this debt.
Of course, the provider won't wait for you to pay forever. If your bill becomes significantly past due, they're likely to sell it to a debt collector. When this happens can vary and depends on the healthcare office's practices. Generally, you can expect your bill to go to collections after 90 days of non-payment. That said, some providers will only give you 60 days, while others will wait 180 days before turning your debt over to a collector.
Even after that, not every unpaid medical debt will end up on your credit report. Effective April 2023, the three credit bureaus — Experian, TransUnion and Equifax — removed all unpaid medical debt that had an initial balance below $500 from credit reports. Any new medical collections under $500 also won't appear on credit reports as well.
If your medical debt is over $500, you still have time. Specifically, the credit bureaus provide a 365-day waiting period before unpaid medical collections appear on a consumer's credit record. This grace period offers an opportunity to resolve the issue by working with an insurance company or figuring out other means to pay. Paid medical collections don't appear on credit reports.
Once the waiting period is over, the collection account will pop up on your credit profile. Unless you pay the collectors, it will stay there for seven years and can negatively affect your scores.
How to check for medical debt on your credit report
If you're worried you may have medical debt on your credit record, don't wait to have your fears confirmed by a debt collector.
By law, you're entitled to a free copy of your credit report from each bureau once a year. And currently, you can get free weekly credit reports at AnnualCreditReport.com.
Alternatively, you can use a free credit monitoring service. CNBC Select recommends CreditWise® from Capital One which allows you to check accounts and balances on your TransUnion credit report, including closed accounts and collections. Note that you don't have to be a Capital One cardholder to use the service.
Experian Dark Web Scan + Credit Monitoring is another excellent option. It's also free and you get an updated Experian credit report every 30 days.
Experian Dark Web Scan + Credit Monitoring
Cost
Free
Credit bureaus monitored
Experian
Credit scoring model used
FICO®
Dark web scan
Yes, one-time only
Identity insurance
No
Terms apply.
If you see medical collections on your credit report, first make sure they belong there. Anything under $500 and less than one year old shouldn't appear on your record. If you find any inaccurately reported medical debt, you can dispute the debt and (hopefully) get it removed.
But if the debt legitimately belongs on your report, the only way to deal with it is to pay it off.
What to do if you have medical debt
Whether you've just received a bill you can't afford or it's already made its way to collections and your credit file, you have options to get your finances back on track.
- Discuss a payment plan. Before you let your bill go to collections, talk with your healthcare provider and ask if it's possible to set up a payment plan.
- Hire a medical billing advocate. These professionals work with insurance companies and healthcare providers to negotiate your medical bills on your behalf — for a charge. Still, paying for this service can save you thousands of dollars if you're working with a reputable advocate.
- Look into financial assistance. Some providers offer income-driven hardship plans. You also might be able to qualify for help from federal, state or local programs or help from non-profit organizations.
- Negotiate your debt. Your healthcare provider might agree to work with you by offering a discount for paying in full. They might also let you make a down payment and pay the remaining balance over time. Or, if your bill is already in collections, you can negotiate with the collection agency since they most likely bought the debt for pennies on the dollar.
- Look into a 0% APR credit card. This type of card allows you to carry a balance without accruing interest for a certain period (after which you'll be charged the card's standard APR). If you go down this road, make sure you have a foolproof plan to pay off the debt in time, because you'll be turning your medical debt into regular debt, meaning it will immediately start affecting your credit scores.
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Bottom line
Medical debt can get extremely expensive, putting your financial well-being at risk. While you usually have some more time to settle your medical debt before it starts harming your credit, you don't want to let the situation spiral out of control. Work with your healthcare provider on any possible payment plans, and if things get desperate, consider using a 0% APR credit card to help settle your debt.
Why trust CNBC Select?
At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every credit guide is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of credit monitoring products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.
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