How Does Medical Debt Affect Credit Scores?

The Impact of Unpaid Medical Debt

Unpaid medical bills can linger on credit reports for up to seven years from the date they become delinquent, posing a significant threat to credit scores. If medical debt exceeds $500 and is sent to collections, it can start affecting credit scores after just one year. This financial burden can have severe consequences, jeopardizing access to housing and even contributing to homelessness. Read more about rebuilding credit after bankruptcy.

Changes in Medical Debt & Credit Policies

In response to the challenges posed by medical debt, new federal laws and credit scoring adjustments are being implemented to lessen its impact on credit scores. Credit scoring models like VantageScore and FICO are adapting their calculations to better accommodate medical debt, and major credit bureaus such as TransUnion, Experian, and Equifax are also adjusting their practices to reflect these changes. 

Additionally, the Biden administration has proposed a rule to eliminate medical debt from credit reports altogether. Learn more about the benefits of debt settlement here.

Negotiating with Healthcare Providers

Negotiating with healthcare providers can be an effective strategy to manage medical bills. Many providers are open to settling bills or arranging payment plans to prevent non-payment. By reviewing charges with providers and negotiating a deal, such as a reduced lump-sum payment or an interest-free payment plan, individuals can find manageable solutions. It’s crucial to document the agreement in writing and adhere to the payment schedule.

Disputing Medical Debt on Credit Reports

Disputing medical debt on credit reports is an essential step if you suspect errors in your medical collection accounts. Start by contacting your medical provider or the collection agency to dispute any inaccuracies. Once you’ve done this, file a dispute with each credit bureau that lists the false information. 

If the dispute is resolved in your favor, the credit bureau will edit or remove the collection account from your credit report, ensuring your credit score reflects accurate information. Learn more about creditor harassment here.

Monitoring Credit After Medical Debt is Paid Off

After paying off medical debt, it’s crucial to regularly monitor your credit reports to verify their accuracy. By visiting AnnualCreditReport.com, you can request free weekly credit reports from the three major credit reporting agencies, which is especially useful during times of financial uncertainty. 

Additionally, credit monitoring services like Chase Credit Journey can alert you to any changes and provide valuable insights, helping you maintain a healthy credit profile.

Resources for Managing Medical Debt

There are several resources available to help manage medical debt effectively. Organizations such as Undue Medical Debt and the Patient Advocate Foundation collaborate with individuals to assist in paying off medical debts. If you’re eligible for Medicaid, it may cover medical bills retroactively. Another suitable option is to apply for a 0% APR credit card, which allows you to pay off medical debt without incurring interest.

Conclusion

Medical debt impacts millions of Americans and can negatively affect credit scores. Individuals can take proactive steps to protect or improve their credit by understanding how medical debt affects credit scores. Making timely payments, keeping detailed records, and monitoring credit can help alleviate the burden of medical debt and contribute to building better credit.