How Medical Debt Can Impact Your Credit Score

Medical debt can negatively impact your credit score by increasing your credit utilization ratio. Or, if you don’t pay off the debt, by being listed as a charge-off or an item in collections on your credit reports.

Medical debt can have a direct impact on your credit score in a few different ways. How it will affect your credit score will depend on a few different factors, like:

Where you check your credit score
How much medical debt you have
How long you’ve had that medical debt
If you’ve fully paid off your medical debt
If you’re unable to pay your debt, and it goes to collections

There have been recent changes made to the way that medical debt is reported on your credit that may reduce the hit your credit takes, but the different rules surrounding medical debt mean that understanding its impact can be a bit more confusing.

How Medical Debt Can Hurt Your Credit

The reality is that unpaid medical bills can affect your credit score if they’re listed on your credit report. Unpaid medical debt can have an immediate impact on your credit utilization ratio, which is the ratio of total debt compared to the amount of unused credit you have available.

If you don’t make payments on your medical debt, like other types of debt your medical debt can be charged off and sent to collections. A charge-off and an amount in collections are both negative items that could impact your credit and your credit score for up to seven years.

Medical Debt Vs. Other Forms of Debt

If you currently have unpaid medical debt, you’ll be happy to learn that there have been changes to the way this debt is recorded on credit reports. The three main credit reporting agencies, TransUnion, Equifax and Experian, are changing the way they handle medical debt.

For instance, VantageScore 3.0 and VantageScore 4.0 no longer consider medical debt when calculating credit scores. While FICO does still consider medical debt listed on a credit report, it holds less weight than other types of unpaid debts.

How Long Does Medical Debt Stay on Your Credit Report?

Unpaid medical debt can remain on your credit report for up to 7 years or until it’s paid in full. All paid medical debt is removed from your credit report. However, the removal process can take up to 30 days to complete.

Bills under $500 will not appear on your credit reports.

It’s important to note that this doesn’t relieve you from paying your medical debt. You still owe these medical bills, and medical debt collectors can still contact you. It only means this debt will no longer be part of your credit report. Medical organizations and collection agencies can still take other actions, such as court action, if you fail to pay this debt.

How to Get Medical Debt Off of Your Credit Report

Everyone makes mistakes sometimes, and credit reporting agencies are no different. It’s important to regularly check your credit reports to make sure they don’t include any errors. All three major credit reporting agencies allow you to request one free credit report each week. You can also check out your Free Credit Report Card to see how information on your credit report is impacting your credit score.

If you believe any medical debt is listed on your credit report in error, you can take steps to have this debt removed. With the new reporting changes in mind, you should also take steps to have any medical debt that’s paid in full, unpaid medical bills less than $500 or debt that’s less than 1 year past due removed from your credit report.

You can file a dispute by submitting a credit challenge letter explaining the error, along with any documentation to prove your claim, directly to the credit reporting agency. These agencies are required to investigate all dispute claims. If these agencies find the debt is listed in error, they’ll remove it from your credit report.