How do medical bills affect your credit score?

If medical bills get you down, you’re not alone. In fact, a recent study shows more than 40% of Americans faced medical debt in 2022. That's about 100 million people. Luckily, recent legislation could work in your favor to help when you have medical bills. Here we explore how medical bills affect your credit score and steps you can take to protect or even improve your credit score no matter how much medical debt you hold.

What is medical debt?

Medical debt can come in several forms, but it is any balance owed after receiving a medical treatment, health care service or health product. You may undergo surgery at a hospital or clinic and receive a bill for the portion your insurance didn’t cover. Or you may receive a new wheelchair that was customized to your needs and then get a bill for your out-of-pocket cost. You may pay the entire bill at once, or you may be able to work out a manageable repayment plan with the provider. If the bill goes unpaid for many months, the medical provider may sell the debt to a collections agency.

Does unpaid medical debt impact your credit?

Yes, medical debt does have the potential to impact your credit. It’s helpful to first understand that a medical bill itself does not affect your credit if you pay it on schedule. The bill you receive from a hospital, or the payment plan you work out with a provider, is typically not reported to the three major credit bureaus that compile your credit report: Experian™, Equifax^® and TransUnion^®. However, your credit may be impacted if the bill goes unpaid.

When you have medical debt, or a bill that is not being paid, the provider may try to contact you through letters or phone calls. If the bill remains unpaid, typically for several months, the provider may decide to turn over the debt to a collections agency. This could negatively affect your credit. Collections accounts typically appear on your credit report and take many years to fall off. This has a negative impact on your credit score and may affect your creditworthiness with lenders. However, due to new guidance in the Consumer Protection for Medical Debt Collections Act, there are a few instances in which this debt may not affect your credit or could be removed from your report altogether.

Changes in medical debt and credit policies

Thanks to new federal laws and changes in how the credit scoring companies VantageScore^® and FICO^® calculate scores, here are a few shifts in how medical debt may affect a person’s credit

• Unpaid medical debt in a collections account will only appear on your credit report after one year.
• Medical debt in a collections account will be completely removed from credit reports once paid.
• VantageScore^® 3.0 won’t use paid or unpaid medical debt under $500 in credit score calculations.

These changes won’t necessarily erase the possibility that hospital bills may affect your credit score, but they could help protect your credit in the event you are facing medical debt. There are also steps you could take to improve your medical bill payment practices and potentially build better credit along the way.

Other ways to help keep medical debt from affecting your credit score

If you’re working to resolve medical debt, you have options, such as speaking with the provider and finding a manageable payment schedule. When using this strategy, it can be helpful to get repayment arrangements in writing. That can give you a handy reference for your payment plan and back you up if challenges arise —  for example, if you need to prove that your payments are on time if that comes into question by your lender.

If you suspect your medical debt may be the result of an insurance error or an issue with identity fraud, you can collect evidence and report it to the necessary agencies, such as the three major credit bureaus, the police and your health care providers. This backup material may include police reports, identification documents and fraud notifications your creditors may have sent you. Taking these precautions can help keep your bills from being marked as unpaid and potentially falling into collections, which could assist in preventing medical bills from harming your credit.

Help keep track of your credit after experiencing medical debt

Given the potential for medical debt to impact your credit score, it may be a good idea to keep track of your credit with some regularity. The good news is you don’t have to go it alone. Credit monitoring with Chase Credit Journey^® can also notify you when changes occur in your credit score that could affect your credit report. If you check into these notifications, they often offer insights to help you understand the reasons behind these shifts and how they could impact your credit.

Chase Credit Journey^® also offers identity theft protection services that can help with this process, so you don’t have to go it alone. These tools include identity monitoring and are set up to alert you when your identity may be exposed to vulnerabilities like a data breach, for example. 

In summary

When you have medical debt, you may be wondering how it might affect your credit score. Millions of Americans are in this same situation.  Now there are ways to reduce the impact that medical debt may have on your credit. And with help from Chase Credit Journey^®, there are also actions you can take, like making timely payments and keeping detailed records of the bills, to help ease the burden of medical debt and build better credit.