Do Medical Bills Affect Your Credit? Here’s What You Should Know

A recent study found that 2 in 3 patients cannot pay off their medical bills. In 2016, for bills averaging less than $500, 68% of individuals did not make payments on time. By 2020, this number could climb to a whopping 95%!

Navigating healthcare and being able to protect yourself financially can feel like a losing battle. Are you wondering, do medical bills affect your credit?

Let’s get into what you need to know!

Do Medical Bills Affect Your Credit?

To put it simply, it depends. It depends on the lender. Some medical debts can impact your score severely, especially if the lender uses older versions of credit scores.

First of all, you should know that you have several different credit scores, and each of them can be affected in a variety of ways.

For example, the FICO 9 (the newest score) disregards paid collection accounts. Furthermore, open medical collection accounts carry less statistical weight than they did in previous models.

However, most accounts still use the FICO 8. This model examines any small collection bills if the original balance exceeds $100.

The Vantage 4.0 score, on the other hand, separates medical collection bills from other collection accounts. It penalizes non-medical collection accounts but doesn’t affect medical ones as harshly. It also disregards medical bills with less than six months in collections.

The silver lining for medical bills and credit scores? The three major credit reporting agencies, Transunion, Equifax, and Experian, don’t report medical debt until after 180 days after it incurred.

This gives you ample time to plan out how to take care of medical bills.

Avoiding Negative Credit Impact

A low credit score can impact everything, from how a potential employer screens you to the interest rate you receive for a new home.

Ideally, you want your score to be as high as possible. That said, a medical crisis can demolish even the most substantial emergency savings.

Stay Updated on Your Medical Bills

Insurance can be undoubtedly tricky to navigate. In fact, research shows that 96% of Americans struggle to understand basic insurance terms.

To stay safe, consult with your insurance company after every doctor or hospital visit. Yes, this may seem like overkill, but it will help you determine if you have a balance. Even if you have a premium insurance policy, you shouldn’t assume that they will cover everything.

Often, you can also check your balance on your company’s online portal. Make it a habit to check it once every two weeks or month- and after medical appointments or surgeries.

Finally, don’t forget to comb through your mailbox! Even though most of us receive copious amounts of spam, you don’t want to accidentally toss a critical bill.

Request an Itemized Bill

Let’s say you had a standard procedure that was ‘supposed’ to be covered by insurance. Two months later, you wind up with a surprise bill costing $2300.

It’s a familiar scenario. However, it’s one that can devastate individuals and their families.

You can either pay the bill willy-nilly. Or you can freak out. Or you can determine exactly what services were being rendered.

Billing companies and healthcare providers make mistakes – plenty of them. An itemized bill lines each service and provides you with the opportunity to determine how everything stacks up.

Check For Errors

If you believe your insurance covers certain services (that don’t end up being covered), call your provider. You need to play an active part in your medical planning.

You can also check for the bill’s validity. For example, if you don’t believe you actually owe a bill, you can ask the collection agency to validate the debt in writing within one month of receiving it. You can also dispute it with the credit agencies.

Medical bill scams are rampant. Make sure to determine the legitimacy of any bill you receive before sending payment.

Negotiate With The Collectors 

Striking a reasonable compromise with the collection agency is possible. First of all, you can ask if paying it off immediately will avoid them reporting you.

Ideally, you want to aim to remove the medical debt from your credit report. Some agencies refer to this process as a ‘pay to delete.’ If your agency agrees to these terms, get it in writing.

Likewise, some situations may feel completely unfair or even ridiculous. For example, maybe you never received your copy of the bill. If this occurs, you can consider filing a formal complaint with your state’s attorney general or the Consumer Financial Protection Bureau (CFPB).

You can also contact your provider and request them to pull the bill from collections to enable you to pay them directly. If the provider agrees to this, the agency will remove the debt from your report.

Negotiate For A Payment Plan

If you already know that you won’t be able to pay a bill in full, contact your insurance to determine if you can collaborate on a payment plan.

They don’t have to agree to it. However, most insurance companies want to work with their customers. After all, they want to get paid, too!

However, you should note that providers can still send bills to collections even if you’re making payments. Make sure to agree on a payment arrangement in writing.

Alternatively, you can consider opening up a credit card with a 0% APR to transfer your balance. That way you can pay off your bill on your terms without it going to collections.

Final Thoughts

Do medical bills affect your credit? As you can see, it depends on the bill, lender, and your proactivity in your treatment.

Are you struggling with a low credit score and looking to improve it fast? Be sure to check out our essential tips today.