Medical Debt and Your Credit Score

  • Medical debt is the most common form of collections account. According to the Federal reserve almost 1 in 6 credit reports contain a medical debt collection. 
  • Many Americans report a lower credit rating if they have unpaid medical bills because medical collections accounts do major damage to your credit score, in turn making it harder to get a loan at a low interest rate.  More than any other debt you will need to work hard to protect your credit score.
  • The injury to your credit score will lessen over time but it will stay on your credit report for 7 years. Federal Law dictates that negative items drop off your credit report within that time, with the exception of a bankruptcy filling which can stay on your report for 10 years. While any collections item, medical or otherwise, can lower your credit score by as much as 100 points, if you have a higher credit score a negative strike will impact your score more than someone with a lower credit score.
  • Unlike your bank or credit union, your doctor's office does not have a direct relationship with credit bureaus, therefore your doctor's office is not regularly reporting your payments on account.  The only information the credit bureaus here is if you are delinquent in your medical bills.  If your Doctor's office turns over your medical debt to a collection agency the collector will try to reach you and get you to pay the outstanding bill.  However at this point your unpaid bill is probably already showing on your credit report because it was sent to collections. 
  • Failure to pay a bill affects the biggest part of your credit score: payment history.
Can a medical bill be removed from my credit report?
If the reporting is accurate, and you did not pay your medical bill, your only recourse is to maintain good credit habits: paying bills on time, keeping your credit balances low, etc.

What if the medical bill went into collections by mistake?
Make sure you are not being charged for services not rendered, and verify that insurance covered everything in your policy.  To avoid collections at all costs and the pending damage to your credit score, pay the bill and then dispute it with your insurance company for reimbursement.

Follow these steps to have it removed from your credit report:
  • Collect Documentation: Find documentation that you or your insurer paid the bill.  Get payment records from your Doctor's office, find canceled checks, and find old credit card statements.  Make copies of all to include with your letter of dispute. 
  • Alert all three credit bureaus that you are disputing the collection. Send a letter detailing the error along with your documentation copies.
  • Fair Credit Reporting Act requires all credit bureaus to follow up on any incoming credit reporting error disputes.  Keep the lines of communication open in case you need to provide additional documentation.
  • According to a coalition of consumer groups, 73 million Americans experience medical billing problems or shoulder medical debt at any given time
  • A study conducted for the AMA found errors in nearly one in ten medical claims processed by the nations largest insurance companies
  • An effort has been proposed in the Senate called the Medical Debt Responsibility Act which would require credit agencies to remove medical debts form credit reports within 45 days of payment. This is an amendment to the Fair Credit reporting Act and the Fair Debt Collection Practices Act
How to prevent future medical bills showing up on your credit report:
  1. After your insurance has paid for the date of service, and if you owe additional money to the doctor, pay your medical bills as soon as you receive them.

  2. Call your insurance company and ask any questions regarding what your policy covers. 

  3. If you can't afford to pay a medical bill, contact your doctor's office and ask if you can negotiate it to a lesser amount, or at least set up reasonable payment terms.  Be sure to get this in writing in case a dispute arises in the future.

It is strongly suggested that you find a reputable attorney to answer any legal questions. The information may help you to have a better understanding of how to manage debt, how it affects your credit score and provide answers to some of your questions, but it in no way serves to completely educate an individual on how to manage all types of debt.