Medical Bills on Your Credit Report: Everything You Need to Know

Everything you need to know about medical bills on your credit report

A serious illness or injury can be very disruptive. Aside from healing, you’ll likely be overwhelmed for a little while as you try to put your work and family life back together.

Unfortunately, there’s also a strong chance your finances could be impacted by your stint in the hospital. If an unpaid medical bill makes its way to your credit report, your credit rating could suffer for years. Not sure exactly how medical bills affect your credit and how to deal with the fallout if you end up in collections? Take a look at the details below for more information.

Do medical bills affect credit?

Unlike a bank or credit union, your doctor’s office probably doesn’t have a direct relationship with the three major credit bureaus. As a result, they’re not regularly reporting your payment information; the bureaus only receive word about one of your medical bills if it goes unpaid.

In this scenario, your medical provider will turn your debt over to a collections agency. The collector will then get in touch with you and try to get you to pay. But at this point, your unpaid bill is probably already showing up on your credit report as having gone to collections.

This is where things get messy, because the information on your credit report is used to create your credit score. Failure to pay a bill affects the biggest portion of your credit score, payment history. Consequently, having a medical bill in collections will probably result in serious damage to your credit score.

What’s more, collections can take up to seven years to drop off of your credit report, although its impact on your credit score will lessen over time. In short, an unpaid medical bill could cause headaches for years.

Nerd note: In August 2014, the company responsible for the most widely used credit score in the U.S. announced that its new scoring model will treat medical debts differently than past versions. FICO 9 will weigh medical bills in collections less heavily than other types of unpaid accounts. However, it may take some time for lenders to start using FICO 9, so don’t expect any huge changes to your credit rating just yet.

Can I get a medical bill removed from my credit report?

If you have a medical bill in collections and it’s hurting your credit score, you’re probably wondering what you can do to have it removed. Unfortunately, assuming that the reporting is accurate – meaning you really didn’t pay the bill – there’s not a whole lot you can do.

As of August 2014, the credit scoring model most lenders rely on treats paid and unpaid collections accounts the same. This means that even if you pay the bill, your score likely won’t improve as a result (although it will get the bill collector off your back). The best thing to do in this case is to be patient and continue good credit habits, like paying your other bills on time and keeping your credit card balances low. This will help your credit score bounce back over time.

On the other hand, if a bill that you or your insurer paid went into collections by mistake, there are steps you can take to have it removed from your credit report:

  • Gather documentation – Collect as much documentation as you can that the bill was paid. Ask for payment records from your doctor’s office, find copies of canceled checks or dig up old credit card statements. Make copies of these documents and include them with your dispute letter.
  • Send written notice – Alert the credit bureaus that you’re disputing the collections. Send a letter to the bureaus reporting the error (make sure to check all three of your credit reports to figure out which ones received the wrong information) that explains the nature of the error. Be sure to include documentation of your claim.
  • Keep communicating – The Fair Credit Reporting Act requires the credit bureaus to follow up on all credit reporting error disputes. Keep communicating with the bureaus to check on the status of your claim, and be prepared to provide additional documentation if requested.

There’s no guarantee that the error will be removed from your credit report, especially if you have spotty documentation and the doctor’s office isn’t on your side. But because a poor credit score can make borrowing money really expensive, it’s definitely worth a shot.

Prevent medical bills from landing on your credit report in the future

Moving forward, there are steps you can take to prevent future medical bills from affecting your credit. Here are the Nerds’ top tips:

Pay bills as soon as they come in – If you owe money to your doctor that your insurance won’t cover, pay the bill as soon as it comes in. This way, you are less likely to forget about it.

Follow up with your insurance company – Know the ins and outs of your insurance policy and follow up by phone or e-mail to be sure they’re paying the bills they’ve agreed to cover. Many people end up in collections because they assume their insurer paid a bill that it didn’t.

Negotiate unmanageable bills – When you can’t afford to pay a medical bill, it’s worthwhile to contact your medical provider and try to negotiate it down. If you’re successful, be sure to get the new amount you owe in writing. This way, you have a record of your agreement if a dispute arises.

Consider hiring a billing advocate – If you’re overwhelmed by your medical bills and aren’t sure how to proceed, think about hiring a medical billing advocate. This professional will sort through your bills and try to negotiate them on your behalf. The service might cost you a few hundred dollars, but it could save you thousands in the long run.

The bottom line: Medical bills can have a significant impact on your credit if they end up in collections. Keep our suggestions for preventing this fate in mind. The next time you apply for a loan, you’ll be glad you did!
 
[4 in 5 medical bills contain errors. We help you catch them. Call (800) 503-5404 or sign up here for a free consultation with a medical billing expert.]


Credit report photo courtesy of Shutterstock.

We want to hear from you and encourage a lively discussion among our users. Please help us keep our site clean and safe by following our posting guidelines, and avoid disclosing personal or sensitive information such as bank account or phone numbers. Any comments posted under NerdWallet's official account are not reviewed or endorsed by representatives of financial institutions affiliated with the reviewed products, unless explicitly stated otherwise.