Do Medical Bills Affect Your Credit?

Medical bills have become a common source of financial stress for American citizens. More than 41% of U.S. residents carry unpaid medical debt or struggle to repay their hospital bills. All it takes is one major accident, unexpected surgery, or diagnosis to impact not only your physical wellbeing but also your credit score, payment history, and overall financial health.

If you’re dealing with medical debt, you’re not alone. In this guide, we’ll take a look at how medical bills affect your credit. We’ll also discuss some common repayment options, plus three major changes that could potentially improve your credit score and erase the medical bills on your credit report.

Does medical debt affect your credit score?

Unpaid medical debt won’t affect your credit score immediately. That’s because most healthcare providers don’t report medical debt to the top three credit bureaus (Equifax®, Experian™, and TransUnion®).

Instead, you have a period of time to repay your balance in full. Usually, the payment deadline is 30 days from the time your provider bills your account, unless the clinic or hospital works with you to set up a repayment plan.

As long as you pay your bills within your healthcare provider’s required time frame, your medical debt will never appear on your credit report. However, if you’re unable to make your payments, your medical provider may transfer your account to a debt collection agency. This agency will report your debt to the credit bureaus.

What happens when medical bills go to collections?

After the collection agency reports your debt, you’ll still have a window of time to repay your bills before they appear on your credit report. This window, known as a grace period, previously lasted for six months. However, the credit bureaus collectively decided to extend the length of the grace period for medical collection debt starting July 1, 2022.

The grace period gives you the opportunity to address and correct any errors on your bills and determine the next best steps to repay your debt. The repayment window also allows you to work with your health insurance company to determine if it will cover any or all of your treatment.

If you’re unable to repay your medical debt during the grace period, it will likely appear on your credit report and remain there for up to seven years. With that in mind, it’s important to make a plan to repay your medical bills as quickly as possible.

How much can medical debt lower your credit score?

Unpaid medical bills can cause your credit score to drop by as much as 100 points. That’s because your repayment history is the single largest factor used to determine your credit score, making up 35% of your rating.

Still, credit bureaus know medical debt is complex. According to studies by the Consumer Financial Protection Bureau (CFPB), medical debt on a credit report rarely indicates how likely an individual is to repay other debts in the future.

With that in mind, newer credit score models place less weight on medical bills and more on traditional credit lines. Additionally, starting in 2022, changes in reporting may remove up to 70% of medical debt from U.S. consumer credit reports.

How to get medical bills removed from your credit report

If medical debt has left you feeling stuck, we’ve got good news. Thanks to these changes in reporting, you have more options than ever to delete medical collections from your credit report.

Let’s take a look at the three changes. We’ll also look at what medical debts will be removed from your credit report and the types of debt that aren’t covered by the new reporting guidelines.

1. You won’t see paid medical collections on your credit report

Beginning July 1, 2022, Equifax®, Experian™, and TransUnion® will drop all paid medical collection debt from your credit report. Previously, paid medical collections remained on your report for up to seven years, unless you successfully petitioned to have them removed.

Removing medical collections from your credit report will likely result in a more accurate view of your repayment history, especially if you’ve made timely payments on your other credit lines. As a result, your credit score–and overall financial health–could dramatically improve.

2. The grace period for unpaid medical debt in collections will double

The credit bureaus have decided to extend the six-month grace period before medical collections appear on your credit report. On July 1, 2022, medical collection accounts won’t appear on your accounts for 12 months, giving you more time to repay your debt and preserve your financial health.

3. Medical collection debt under $500 won’t affect your credit report

Starting in early 2023, credit bureaus will no longer add medical debt under $500 to your credit report. That means your credit will remain intact even if your medical bills go into collections.

4. The changes won’t remove all medical collections from your credit report

The consumer-friendly changes to how medical debt affects your credit score could have a positive impact on your rating, but they aren’t a free pass to ignore your hospital bills now or in the future. The new reporting guidelines won’t delete all medical collections from your credit report, either, so it’s vital to understand how you may be affected.

For instance, if you owe more than $500 in medical debt and your account has been in collections for over a year, your debt could still show up on your credit report. Your hospital bills may also remain on your report, if you used a credit card or loan to pay for them.

What are my options for paying off medical debt?

Unfortunately, the changes in reporting won’t make your medical debt go away overnight. But, it doesn’t mean you need to lie awake worrying about your unpaid medical bills.

Instead, consider these effective ways to repay your debt.

- Check for accuracy
  You may have heard of a social media hack that could (potentially) reduce your medical bills: asking for an itemized invoice. While an itemized bill won’t always reduce what you owe, up to 80% of all medical bills contain errors, like duplicate charges or services you didn’t actually get.Asking for itemized bills allows you to make sure you’re only paying for the medical care you received. You can also ask your healthcare provider for more information on charges you don’t understand.
- Request a repayment plan Depending on your circumstances, your medical provider might provide a low- or no-interest payment plan. While this isn’t always the case, many healthcare providers would rather receive their payment over time versus never getting paid all.Pro tip: If you decide to request a repayment plan, check your budget to determine how much you can afford to pay each month. Let your healthcare provider know the amount, too. That way, you won’t get stuck with unaffordable monthly payments.
- Negotiate a settlement You may be able to settle your bill for less, especially if you can prove that your current financial circumstances would make paying the bill impossible–or at least extremely difficult. Many healthcare providers are accustomed to working with their patients and may be able to reduce the bill–or drop the debt entirely.
- Research medical credit cards Generally speaking, it’s not a great idea to put medical bills on your credit card unless you know you can pay them off before your payment is due. Otherwise, you could get hit with high interest rates and late fees that increase the total amount of debt you owe.That said, you may consider a medical credit card as a last resort if you’re tight on funds and don’t have any friends or family who could loan you the money. You may even be able to qualify for a medical credit card with a 0% introductory period. This allows you to pay off your debt without incurring extra fees for a certain period of time.Keep an eye out for deferring interest charges, though. Some medical credit cards advertise interest-free periods, only to hit users with hundreds or thousands in accrued interest—or earned interest that hasn’t been paid—after the promotional window ends.

Consider a medical loan

A medical loan is a type of personal loan you can use to repay bills for emergency care, elective procedures, or other medical-related expenses. You can also use a loan to consolidate multiple medical debts into a single monthly payment.

Like most personal loans, a medical loan is usually unsecured. This means it isn’t guaranteed by collateral like your home or car. As a result, it may come with slightly higher interest rates, especially if your credit score falls below the good-to-excellent range.

However, a lower credit score doesn’t necessarily mean you can’t qualify for an affordable medical loan. Some online lending platforms like Upstart look at more than your credit score when you apply for a medical loan. As a result, you may get approved for a loan with a better interest rate, even if you have a lower credit score or no credit at all.

After you get approved for a medical loan, you can use the funds to pay for your healthcare costs. Then, you’ll start making fixed monthly payments to your lender until you’ve paid off the loan, plus interest.

So, what’s the best way to pay your medical bills?

The truth is, there’s no one-size-fits-all approach to paying your hospital bills and erasing medical debt from your credit report. Still, it’s important to remember you have options, ranging from negotiating a repayment plan to getting approved for a safe, affordable, and legitimate medical loan.

And if you decide a medical loan is right for you, Upstart may be able to help.

Unlike other lending platforms, Upstart’s model considers factors like education² and work history when determining the cost of your loan. That means you could qualify for a medical loan to pay off your hospital bills faster, get medical debt off your credit report, and recover mentally, physically, and financially.

Upstart Network, Inc. (NMLS #936133) is not a lender. All loans on its marketplace are made by regulated financial institutions.

All mortgage lending is conducted by Upstart Mortgage, LLC dba Upstart Home Lending. (NMLS #2443873). Equal Housing Opportunity.

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Upstart’s model considers education: Neither Upstart nor its lending partners have a minimum educational attainment requirement in order to be eligible for a loan.
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