How to Deal With Medical Bills on Your Credit Report
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How medical debt is reported by the three major U.S. credit bureaus and incorporated into credit scores is changing.
Credit bureaus: Since July 1, 2022: Consumers had paid medical debt erased from their credit reports, and the delay before unpaid medical debt appears on credit reports jumped from six months to one year. By mid-2023: The credit bureaus expect all unpaid medical debt less than $500 to no longer appear on credit reports. TransUnion says it anticipates making this change by the end of April.
Score providers: In addition, scoring company VantageScore expects to exclude all paid and unpaid medical debt — regardless of how much is owed or how long the debt has been in collections — from 3.0 or 4.0 score calculations in early 2023. TransUnion says the change will go into effect April 1. Your credit score seen on NerdWallet, which is a VantageScore 3.0 fueled by TransUnion data, will reflect this. FICO says the new medical debt guidance will have little impact on its scores because of the way it already differentiates between unpaid medical debt and other kinds of unpaid debts.
A serious illness or injury can be disruptive. You need to heal, and you may be overwhelmed for a while as you put your work and family life back together.
There’s a strong chance your finances will be affected, too, if an unpaid medical bill makes its way to your credit reports. (Read more about your options for paying medical bills).
Even smaller medical bills can strain finances, too. Here's how medical bills affect your credit and how to deal with the fallout if you end up in collections when a bill goes unpaid.
Do medical bills affect your credit?
Medical bills are most likely to affect your credit if they go unpaid for many months and get turned over to collections.
Medical providers don't always report payment information to the three major credit bureaus. As of July 1, 2022, there is a yearlong waiting period before unpaid medical debt can appear on your credit reports.
Also in July 2022, the credit bureaus began removing all paid medical debt from credit reports. Check your reports to make sure that your paid medical debt no longer appears.
But if you don't pay a bill, eventually your medical provider may turn the debt over to a collections agency. At this point, your unpaid bill probably is showing up on your credit reports as having gone to collections.
This is where things get messy, because the information on your credit reports is used to create your credit scores. Failure to pay a bill affects the biggest factor determining your credit scores: payment history. Consequently, having a medical bill in collections can result in serious damage to your credit scores.
Can I get medical bills off of my credit reports?
If your medical bill is in collections by error and is hurting your credit score, you’re probably wondering if it can be removed. If the bill is less than one year old or if it has now been paid by insurance, you should be able to dispute the error with the credit bureau.
Making the effort to file a dispute is worth it because poor credit scores can make borrowing money really expensive.
Here are the steps you can take to dispute medical collections on your credit reports:
Gather evidence. Collect as much documentation as you can to prove 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.
File your dispute with any credit bureau that's reporting the error. Make sure to check your credit reports from all the three bureaus. Through December 2023, you can get free weekly access to your reports by using AnnualCreditReport.com.
Keep communicating. The Fair Credit Reporting Act requires the credit bureaus to follow up on all credit reporting error disputes. Keep communicating with the companies to check on the status of your dispute, and be prepared to provide additional documentation if requested.
What if insurance didn't or won't pay?
Medical debt collections have to come off your reports if the health insurance company pays up. But what if you don't have insurance, you can't get the insurer to pay or you get tired of waiting on insurance and pay off a collections account yourself?
The damage to your credit depends on the type of scoring model and the version used by a potential creditor to check your creditworthiness, as well as the amount of your debt.
The credit bureaus expect that by mid-2023, unpaid medical debt collections less than $500 will no longer appear on credit reports.
The FICO 9 scoring model will weigh medical bills in collections less heavily than other types of unpaid accounts. However, FICO 9 is not in widespread use by lenders. VantageScore 3.0, a competitor to FICO, is more widely used.
By the end of January 2023, VantageScore anticipates no longer including medical collection data, whether paid or unpaid, in its 3.0 and 4.0 scoring calculations.
Collections accounts can take around seven years to drop off your credit report, although the impact on your credit score will lessen over time. To help your score rebound, the best thing to do is keep consistent credit habits as much as you can, such as paying your other bills on time and keeping your credit card balances low.
Can I stop medical bills from affecting my credit?
You can take some steps to prevent future medical bills from affecting your credit.
Follow up with your insurance company. Understand your insurance policy and follow up by phone or email to make sure the company is paying the bills it has agreed to cover.
Negotiate unmanageable bills. When you can’t afford to pay a bill, contact your medical provider and try to negotiate it down or ask for a payment plan. If you’re successful, get the new amount you owe in writing so that you have a record of your agreement in case of a future dispute.
Get your unpaid debt under $500. By mid-2023, all medical debt less than $500 is no longer expected to appear on credit reports from the three major bureaus. The bureaus made these decisions after a review of medical debt revealed that, for most people, the debt was a result of a one-time or emergency event. If you have unpaid medical debt, it would be a great idea to try to get it below $500 as soon as possible so that it won't appear on your credit reports after the first half of this year.
Consider hiring a billing advocate. If you’re overwhelmed by your bills and aren’t sure how to proceed, think about hiring a medical billing advocate. This professional can sort through your bills and try to negotiate them on your behalf.
Crowdfund your medical bill. Set up a fundraiser with a crowdfunding site such GiveForward to get help with your bills from family, friends and strangers — though it's not a surefire way to pay off medical debt.