Can Medical Bills Be Put On a Credit Report?

Medical expenses can be a significant financial concern, and their interaction with personal credit is a common area of inquiry. Understanding how medical bills are handled in the credit reporting system is important for financial well-being, especially given recent changes designed to mitigate their impact on credit reports.

How Medical Bills Interact with Credit Reports

Medical bills do not appear on credit reports immediately after they are incurred. A healthcare provider attempts to collect payment directly from the patient or their insurance. If a bill remains unpaid for an extended period, it may be sent to a third-party collection agency. At this stage, medical debt has the potential to appear on a credit report.

Significant changes have been implemented regarding how medical collection accounts are reported by the three major nationwide credit reporting agencies—Equifax, Experian, and TransUnion. As of July 1, 2022, any medical collection debt fully paid by the consumer is removed from credit reports. This means a satisfied medical bill in collections no longer negatively affects an individual’s credit history.

The waiting period before unpaid medical collection debt can appear on a credit report has been extended. Previously 180 days, it is now one year. This extended grace period provides consumers with more time to resolve billing disputes, work with insurance providers, or arrange payment plans before the debt is reported. As of April 2023, unpaid medical collection debt with an initial reported balance under $500 is no longer included on credit reports. This change reduces smaller medical debts impacting consumer credit.

Only medical debt that has gone to collections and meets reporting criteria is reported. Medical bills paid directly to the provider or covered by insurance do not appear on credit reports. Recent regulatory efforts aim to further restrict the inclusion of medical debt on credit reports and prohibit lenders from using medical information in lending decisions.

Understanding the Impact on Your Credit Score

When a medical collection account appears on a credit report, it is viewed as a negative mark. Collection accounts indicate unpaid debt for a period, signaling increased risk to potential lenders. The severity of this impact varies, depending on the debt amount and the individual’s overall credit history.

The way medical collection debt affects credit scores has evolved. Newer credit scoring models, such as FICO and VantageScore, may weigh medical collection debt less heavily than other types of debt. Some models may even ignore paid medical collections entirely when calculating a score. This reflects that medical debt often arises from unforeseen circumstances rather than financial mismanagement.

Recent changes in credit reporting policies have shown a positive effect on credit scores. The Consumer Financial Protection Bureau estimated that removing certain medical debts could lead to an average credit score increase of approximately 20 points for affected individuals. This improvement can enhance a person’s ability to access financial products, such as loans or mortgages, often at more favorable terms. The impact of a collection account is more pronounced when it first appears and tends to lessen over time, though it can remain on a credit report for up to seven years if it meets reporting criteria.

Steps to Prevent Medical Bills from Harming Your Credit

Proactive engagement with medical bills can prevent them from negatively affecting your credit. First, carefully review all medical bills for accuracy. Check for duplicate charges, services not received, or incorrect billing codes. Identifying discrepancies early allows for timely correction.

Understanding your insurance coverage and reviewing the Explanation of Benefits (EOB) from your insurer is important. The EOB outlines what your insurance has paid and what remains your responsibility, helping you reconcile bills with coverage. This comparison can highlight billing errors or instances where insurance did not cover what you expected.

Communicating directly with your healthcare provider is beneficial if you anticipate difficulty paying a bill. Many providers offer financial assistance programs, discounted rates for uninsured patients, or options to negotiate the total amount. Engaging in these discussions before a bill becomes overdue can prevent it from being sent to collections.

Setting up a manageable payment plan with the provider is an effective way to avoid delinquency. This allows you to pay off the debt in smaller, affordable installments, demonstrating your commitment. Exploring financial assistance programs, such as hospital charity care, can provide relief for eligible individuals, preventing the debt from escalating.

Addressing Medical Bills Already on Your Credit Report

If a medical bill has appeared on your credit report, specific steps can be taken to address it. Obtain copies of your credit reports from all three major credit bureaus—Experian, Equifax, and TransUnion—to identify the exact entry. You are entitled to a free report from each bureau annually through AnnualCreditReport.com.

If you find an inaccurate medical collection entry, you have the right to dispute it with the credit bureaus. This can be done online, by mail, or by phone. When disputing, provide supporting documentation, such as proof of payment, Explanation of Benefits (EOBs), or correspondence with the provider, to substantiate your claim. The credit bureau will investigate your dispute within 30 days and notify you of the outcome.

For accurate medical debts that have been reported, negotiating with the collection agency is an option. Verify the debt with the agency to ensure its legitimacy and accuracy. You might then negotiate a settlement for a reduced amount or establish a structured payment arrangement that fits your financial capacity.

Recent changes in credit reporting rules provide a significant advantage. These updates mean paying off a medical collection account will lead to its removal from your credit report. This differs from other types of collection accounts, which remain on your report for up to seven years even after being paid. After payment, the collection agency should report the updated status to the credit bureaus, leading to the removal of the entry.