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Can medical bills affect your credit?
Yes, medical bills can affect your credit, but only if they’re significantly overdue. Healthcare providers don’t normally report to the major credit bureaus (Equifax, Experian, and TransUnion), which means that if you pay your bills on time, they won’t appear on your credit report, and your score won’t be affected, either positively or negatively.
If you pay your bills slightly late, your healthcare provider probably won’t report that to the bureaus either. However, if your payments are between 60 and 180 days overdue, they may transfer or sell your debt to a collection agency. They may even send your medical bill to collections without telling you.
Debt collectors do report to the bureaus. This means that if your bill is sent to collections, a collection account will appear on your credit report, which will lower your score.
Medical collection accounts don’t affect your score for 180 days
Once the collection agency has reported your account to the bureaus, you have an extra 180 days to pay off your debt.1 If you pay it off in full before the end of this grace period, the bureaus won’t add the collection to your report and it won’t affect your credit. If you fail to pay it off, your credit score will drop.
How much do medical collection accounts hurt your credit score?
The damage that a collection account will do to your credit score depends on several factors, including your current score and your credit history, but it can be severe. For instance, FICO noted in a 2014 letter to the Consumer Financial Protection Bureau (CFPB) that if you have a FICO 8 score of 780, a collection account can cost you over 100 points.2
Do medical bills in collections affect your credit?
Yes, medical bills in collections affect your credit, but the amount of points you’ll lose depends on your credit profile and the scoring model used. In general, medical debt matters less in newer models than in older ones.
Both FICO 9 and VantageScore 4.0 put less importance on medical collections than other collection accounts. Additionally, paid collection accounts (for all debts, not just medical debts) no longer affect your credit score in the FICO 9 and VantageScore 3.0 and 4.0 models.3 4
FICO notes that if the only negative mark on your credit report is an unpaid medical bill, your FICO 9 score will be about 25 points higher than your FICO 8 score.5
Keep in mind that many lenders still check your FICO 8 score, so there’s no guarantee you’ll benefit from these changes when you apply for a loan.
How long do medical bills stay on your credit report?
Medical bills in collection can stay on your credit report for up to seven years, after which time the credit bureaus must remove them in accordance with the Fair Credit Reporting Act. Paying off your medical debt won’t get the collection account off your credit report any sooner, but it might eliminate the negative effects it has on your credit score.
There are three approaches you can try to get collections removed from your report more quickly:
- File a credit report dispute: You can get a medical collection removed from your credit report earlier if you can prove it shouldn’t be there in the first place. Simply use a sample medical bill dispute letter and send the letter along with supporting evidence to the credit bureaus. This only works for wrongly reported debts, such as medical debts that actually belong to someone else.
- Send a goodwill letter: If the debt is legitimate but you’ve already paid it off, you can write a goodwill letter to your debt collector asking them to have the collection account removed. This is a long shot, but it might work if you explain the financial and medical difficulties that prevented you from paying the bill.
- Try pay for delete: If you haven’t paid the debt yet, try to negotiate with your debt collector to get them to remove the account from your report in return for paying it in full. These negotiations begin with a pay-for-delete letter.
There’s no guarantee that these tactics will work (unless the debt was incorrectly reported, in which case they’re obligated to remove it). There’s no quick fix if they decline to remove your medical debt—you’ll just have to wait for the collection account to fall off your credit report.
Does paying off medical bills help your credit?
Paying off medical bills in collections will help your credit score in newer scoring models, but it won’t make much difference in older models.
As mentioned, FICO 9 and VantageScore 3.0 and 4.0 ignore paid collection accounts. Conversely, older scoring models like FICO 8 don’t distinguish between paid and unpaid collections at all.6
Lenders are more likely to approve your loan applications if you’ve paid your medical debts in full, so aim to repay them regardless of which scoring model your lender uses. If you’re facing overwhelming medical debt, then try negotiating for a debt settlement with the debt collection agency.
