Can Unpaid Medical Bills Affect Credit Score?

This paper seeks to analyze the effects of unpaid medical bills on credit scores.

For many United States citizens, unpaid medical bills are a sad fact. The great expense of health care means that even with health insurance, consumers are likely to suffer significant costs they cannot afford to pay. Naturally, this raises another rather important issue: may unpaid medical costs damage your credit?

The quick response is that unpaid medical bills sent to collection might show up on your credit records and lower your credit score. Unbelievably, medical bills account for more than half of the overall debt acquired. Once a medical bill is past due, it may be reported to the three main consumer credit reporting companies: Equifax, Experian, and TransUnion.

The Effects of Unpaid Medical Bills on CreditScores

There are a few ways that unpaid medical bills can damage your credit.

1. Additional derogatory marks – medical bills that are sent to collections are considered as derogatory on your credit reports. Many of the negative items such as the collections have a vast impact on the credit scores. A credit score will also be impacted by a single unpaid medical bill that has gone to a collection agency.
2. Higher credit limits - Credit limits refer to the total lending limit granted to a cardholder by the credit card company. Medical bills that remain unpaid add to your credit liabilities but do not increase your credit limit, and therefore utilization rises. This is evidenced by the fact that credit is pulled down by high utilization.
3. Credit history damage – The duration of credit history and credit mix are also considered. Unpaid medical bills can decrease the history and mix the negative records in, decreasing the scores.
4. New credit damage – taking new credit while you have unpaid collections accounts is likely to make your application rejected. Again, new credit is good for credit building, and thus, harm is done to your scores here.

For how long do unpaid medical bills affect credit?

Delinquent medical bills that are charged off can remain present on your credit files for as long as 7 years from the day the debts turned bad. However, the major consumer credit bureaus like Equifax and Experian have special rules around reporting medical collections.

• New bills and medical collections below $500 will be excluded from the credit reports of consumers. This even applies to those new and existing medical collections on the credit reports.
• Medical credit collections that are paid will be the first to be archived from credit reports than any other types of collections. It will now be deleted once paid, even if less than 7 years old.
• Unpaid medical collections, which are credit-reported, will now be given a restriction credit reporting period of one year from the date reported. If no payment is made for a whole year, medical collections are wiped off the credit reports.

Thus, unpaid medical bills can be detrimental to credit but they have less credit reporting period as compared to other forms of collection. Clearing medical debts also leads to their deletion in a shorter period as well.

Ways of Managing Medical Bills to Avoid Jeopardizing Credit

Nobody wants to be faced with medical collections that would affect his or her credit score. Here are some proactive strategies to manage medical bills before they ever reach the collections stage.

1. Always cross-check the medical bills and ensure they are genuine charges for the services received. It is always encouraging to remind oneself that mistakes can occur, therefore, it is wise to review carefully.
2. A patient should call the healthcare provider and ask for an explanation of the charges if they sound suspicious or inflated. This assists in billing error detection.
3. Discuss how to structure payment options and bargain for cheaper medical costs. Almost all doctors are ready to agree on an interest-free payment plan.
4. For one, you can call the hospital financial assistance to ask for a lower or even zero co-pay if you meet their requirements. These programs exist in non-profit hospitals.
5. These include payment channels such as credit cards which delay payment from the provider while disputing the accuracy of the bill issued. Do not pay until investigations have been conducted.
6. It is recommended to be more active in communicating with the medical providers regarding bills, rather than just ignoring them. They are sometimes more willing to help active patients.

The Bottom Line

Barrels that are sold to debt collection agencies due to unpaid medical bills can indeed pull down your credit scores. That said, it is possible to reduce credit impacts from medical collections by following certain proactive steps. Knowledge of the medical billing process and being an active participant in the process is the best defense when billing problems arise. It’s also important to review your credit reports often so that you can notice any reporting of medical debts and address them before worsening your credit scores.

Ready to boost your credit score? Call +1 888-804-0104 now for the best credit repair services near you! Our expert team is here to help you achieve financial freedom and improve your credit. Don't wait—get started today!