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Does medical debt affect your credit score?

Recovering from an illness can be made harder by medical debt incurred to get treated. Measures are being taken to limit how it affects your credit score.

How medical debt affects your credit score

Outstanding debts of all kinds can negatively impact your credit score hurting your chances of getting a loan, pushing up the interest rate you pay, being able to buy or rent a house and more. That can cause harmful stress, which can aggravate ill health. That’s why measures are being taken to keep medical debt from affecting your credit score so that recovering from an illness isn’t made harder by debt incurred to get treated.

Since July last year, the three largest credit bureaus, Equifax, Experian and TransUnion, began removing from consumers credit reports past medical debt that has been paid. Furthermore, starting in mid-2023, the credit bureaus will no longer include any unpaid medical debt of less than $500 on credit reports. And for amounts over that threshold, you will have more time before it is reported, going from a six-month window to a full year.

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How medical debt affects your credit score

While having debt can help you build your credit score, unpaid debt that goes into collection can do your rating serious damage. The credit bureaus provide a grace period on unpaid medical debt as it is particularly complicated. Most healthcare providers don’t report to the credit bureaus, so it only shows up once put into collections, which could be anywhere from 60 days to 120 days or more.

The expanded 365-day grace period gives you time to clear up any errors that may appear in the bill as well as set up a payment plan. This is due to the fact that even for those who have health insurance, it may take months before the insurer approves and issues a payment to the healthcare provider.

If you have an inaccurate or fraudulent medical collections on your credit report, you should file a dispute with each of the three credit bureaus. Additionally, you should contact the collection agency and the medical provider. If and when the dispute is resolved in your favor, the debt can be expunged from your credit report.

Leaving a delinquent unpaid medical bill over $500 in collections can stay on your credit report for seven years. However, now once you pay it off, it will be wiped from your credit history according to Experian.

Advocates for patients and consumers push for more protections

According to a KHN-NPR investigation, over 100 million Americans have health care debt nationwide, which has become a crisis for many. More than 50 groups have called on the IRS and the Consumer Financial Protection Bureau to implement measures to protect patients and consumers from the harm that can result from medical debt.

They are advocating for debt incurred for medically necessary care to be prohibited from appearing on consumer credit reports. They also want the IRS and federal government to crack down on certain practices by nonprofit hospitals of denying medical care to people with delinquent bills. As well as acting like for-profit hospitals by selling patient debt to collection agencies.

Furthermore, the advocate groups want the IRS to issue a set of unified rules that would establish common standards for charity care that would be applied uniformly across nonprofit hospitals. The lack of which creates widespread confusion which leaves people who should qualify for charity care with large bills instead.


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