How Medical Bills Can Affect Your Credit Score

Medical bills are a significant concern for many people, and their impact extends beyond just financial strain. They can also have a profound effect on your credit score. Understanding how medical bills affect your credit score is crucial in managing your financial health.

The Connection Between Medical Bills and Credit Score

When you receive medical care, the provider will bill you for any costs not covered by insurance. If you don't pay these bills on time, the medical provider may eventually turn over the debt to a collection agency. Once a debt goes into collections, it can be reported to the credit bureaus (Experian, TransUnion, and Equifax), which could negatively impact your credit score.

How Medical Debt Differs from Other Types of Debt

Unlike other types of debt, medical debt usually doesn't get reported to the credit bureaus immediately. Medical providers typically don't report unpaid bills to credit bureaus. Instead, they may send unpaid bills to a collections agency, and it's this agency that reports the debt. This process can take several months or even years.

Furthermore, credit scoring models give less weight to unpaid medical bills than other types of debt. The FICO 9 scoring model, for example, ignores paid collection accounts and gives less weight to unpaid medical collections than other types of collections.

The Impact of Medical Bills on Your Credit Score

If a medical bill goes into collections and is reported to the credit bureaus, it can significantly lower your credit score. This drop in score depends on various factors such as the amount owed and how late the payment is.

A single collection account can cause a good credit score (700 or higher) to drop by up to 100 points. However, if you already have negative marks on your credit report, the impact might be less severe.

How to Protect Your Credit Score from Medical Bills

• Review your medical bills carefully: Make sure you're being billed correctly. If you find an error, dispute it with your medical provider.
• Negotiate payment plans: If you can't afford to pay your bill in full, ask your medical provider if you can set up a payment plan.
• Pay your bills on time: To avoid having your debt sent to collections, make sure to pay your bills promptly.
• Check your credit report regularly: This will help you catch any errors or signs of identity theft early on.

In conclusion, while medical bills can negatively impact your credit score, there are steps you can take to mitigate this effect. By staying proactive and managing your medical bills effectively, you can protect your financial health.