Updated: Jul 11
If you’ve ever had an injury, illness or surgery, you might know what comes next—the potential for expensive medical bills.
If you’re struggling to pay these bills on time, you’re not alone. But if they aren’t paid, the medical provider could turn the account over to a collection agency. In fact, medical debt continues to be the top reason consumers are contacted by debt collectors, according to the Journal of the American Medical Association.
When medical debt ends up in collections, it could hurt your credit scores. And if you use a credit card to pay your medical bills, there could be an impact as well.
Medical providers typically don’t report to credit bureaus. But they might turn unpaid medical debt over to collection agencies, and this could affect credit scores.
As of July 1, 2022, paid medical collection debt won’t appear on consumer credit reports. In the past, this debt could have stayed on credit reports for up to seven years.
Starting in January 2023, VantageScore® 3.0 and 4.0 models will no longer consider medical collections for credit score calculations.
Starting in 2023, medical collection debt under $500 won’t be included on credit reports.
While certain medical debts may no longer appear on credit reports, individuals remain responsible for paying these debts.
Can Medical Bills Affect Your Credit?
Medical bills can potentially affect your credit, depending on how and when you pay them. The most direct way is when you don’t pay the bill for a period of time and your health care provider turns the account over to a collection agency. If that happens, it will affect your credit scores, although it may take a year for it to appear on your credit report.
If you pay your medical bills with a credit card, it could impact your credit as well, especially if you can’t pay that balance or make the minimum payment. Paying an expensive medical bill with a credit card could also affect your credit utilization ratio, which measures how much available credit you’re using and is an important factor in calculating your credit scores. It’s important to understand your options and how your credit may be impacted. It’s a good idea to work with your insurance provider to understand your coverage options, in-network estimates and more. Having this information before you schedule a doctor’s visit or procedure may help you avoid unexpected expenses for medical treatments. And finding more affordable options might minimize the risk of your bill being turned over to collections.
How Long Do Medical Bills Stay on Your Credit Reports?
A valid collection account can remain on your credit reports for up to seven years, according to the Consumer Financial Protection Bureau (CFPB). Fortunately, Experian® says the collection item has less of an effect on your credit over time. And the three credit reporting agencies—TransUnion®, Experian and Equifax®—recently announced major changes to how medical debt is reported. These changes will affect how long medical bills stay on credit reports and could remove 70% of medical collection debt from consumer credit reports. In the past, paid medical collection debt could have stayed on a person’s credit reports for up to seven years. As of July 1, 2022, medical debt that was in collections but has since been paid will be removed from credit reports.
The credit reporting agencies also stated that the time it takes for unpaid medical debt to show up on credit reports will increase from six months to one year. And starting in 2023, medical collection debt that’s under $500 won’t show up on credit reports at all.
VantageScore Reporting Changes
VantageScore also announced major credit-scoring changes. Beginning in January 2023, VantageScore says it will remove all medical collection debt from its VantageScore 3.0 and 4.0 credit-scoring models. The credit-scoring company estimates the change could help consumers with medical collection debt see up to a 20-point increase in their scores. However, these VantageScore changes could result in some people becoming un-scorable.
That’s because individuals who only have medical collection debt on their credit reports essentially won’t have any credit information to score once medical collections are removed. But it’s important to note that different lenders may use different credit-scoring models to judge creditworthiness. While these VantageScore changes could help some consumers see a boost in their VantageScore 3.0 and 4.0 credit scores, these changes won’t apply to other credit-scoring models—such as FICO®. You can monitor changes to your VantageScore 3.0 credit score by using https://www.annualcreditreport.com.
What Impact Do Medical Bills Have on Your Credit?
Medical bills generally only appear on your credit reports if you don’t pay the bill and your health care provider turns the account over to a collection agency. That’s because most health care providers don’t report to the three major credit bureaus, according to Equifax. However, if the account does appear on your credit reports, it may hurt your credit scores. For example, if your FICO score started at 680, a collection item on your credit reports may cause the score to drop 45 to 65 points, according to the CFPB. And a score of 780 could drop by up to 125 points.
How to Help Get Medical Debt Off Your Credit Reports
You could use AnnualCreditReport.com to keep an eye on your credit reports. If you find inaccurate medical collection debt on your credit reports, you could reach out to the medical provider or collection agency that’s associated with the debt. You can also file a dispute with the credit reporting bureau that’s displaying the inaccurate information. That’s why it’s a good idea to regularly monitor your credit reports for mistakes or changes.
Dispute the Medical Bills on Your Credit Report
Some medical collection accounts may have errors. If that’s the case, contact your health care provider or collection agency first. You can also file a dispute with each credit bureau that lists the incorrect information. It’s free to file, but you may need to show why you believe there’s an error, according to Experian. This may include:
Records from the collection agency.
Documents from your insurance company or medical provider.
Documents that show the bill has been paid, such as copies of a check or a credit card statement.
If the dispute is settled in your favor, the credit bureau will update or remove the collection account from your credit report. It typically takes up to 30 days for the updates to show up on your credit reports. According to Experian, the three major credit bureaus will remove a medical debt reported by a collection agency if you can show that your health insurance company paid the bill.
How to Prevent Medical Bills From Appearing on Your Credit Reports
Being proactive is one of the best ways to prevent medical bills from appearing on your credit reports. By reviewing each medical bill and working out a payment plan with the health care provider, you may avoid the collections process altogether. Consider taking the following steps recommended by the CFPB:
1. Review Every Medical Bill If you don’t understand some of the charges or you believe there’s an error, contact the provider. Ask them to explain each part of the statement or ask for an itemized bill to check how much you were charged for each service.
2. Check Whether Health Insurance Will Pay Ask the health care provider whether they’ve requested payment from your health insurance company. They may have mistakenly sent you a bill before running it through insurance.
3. Pay the Bill Once you understand the charges and you’ve confirmed you’re responsible for the balance, it’s best to pay the bill by the due date. Keep documentation of your payment, and make sure it’s processed.
4. Create a Payment Plan With the Provider If you can’t pay the entire medical bill at once, your medical provider might be willing to set up a payment plan or lower the amount due if you contact them before it’s turned over to a collection agency. Before agreeing to a payment plan, make sure it’s realistic for your budget. Get details of the agreement in writing, then pay the installments on time.
How to Monitor Your Credit
Your credit reports and credit scores play an important role in your overall financial health. This information can influence whether you’re approved for a loan or credit card. And it can also impact the interest rates you’re offered. That’s why it’s important to regularly monitor your credit reports and verify the information they contain is accurate.
Visit AnnualCreditReport.com to request copies of your credit reports. You’re entitled to one free copy from each of the three major credit bureaus every year. And if you find paid medical debt on your credit reports, you can request the agencies remove it.
You can also use one of your credit cards such as Capital One’s CreditWise app to monitor your TransUnion credit report and VantageScore 3.0 credit score or simulate how certain financial decisions could impact your score. The app also scans the dark web for suspicious activity and alerts you if information—such as your Social Security number or email address—is found. You can even get alerts when meaningful changes are made to your TransUnion or Experian credit reports. CreditWise is free to use—whether you’re a Capital One customer or not—and using it won’t impact your credit scores.
Medical Bills and Credit in a Nutshell
If you’re still not able to pay your medical bill, you may want to search for additional resources to help you manage it—and hopefully avoid hurting your credit. Either way, it’s always a good idea to monitor your credit.