How do medical bills impact my credit score?

Medical bills can have a significant impact on your credit scores, but the relationship between medical bills and credit scores is complex and has evolved over time due to changes in credit reporting practices. Here's an exploration of this relationship:

1. Traditional Credit Reporting Practices:

• In the past, medical bills were treated similarly to other types of debt on credit reports. If you had unpaid medical bills, they could be reported to the credit bureaus, and they could negatively affect your credit scores.

2. Recent Changes in Reporting:

• In recent years, there have been changes in how medical bills are reported to credit bureaus, largely as a result of efforts to address issues related to medical debt and credit reporting:

  • Waiting Period: The three major credit reporting bureaus (Equifax, Experian, and TransUnion) implemented a waiting period before reporting medical debt. Under the National Consumer Assistance Plan (NCAP), there is a 180-day waiting period before medical debt can be reported on credit reports. This allows time for insurance claims and disputes to be resolved.

  • Reporting of Paid Medical Debt: Medical debt that is paid by insurance is generally excluded from credit reports. This means that if you have medical debt that is covered by your insurance, it should not negatively impact your credit scores.

  • Newer FICO Scoring Models: Some newer FICO scoring models, such as FICO 9 and FICO Score 10, treat medical collections differently from other types of collections. They weigh medical collections less heavily, which can result in less severe credit score impacts.

3. Unpaid Medical Debt:

• Unpaid medical bills that go to collections can still have a negative impact on your credit scores. If these bills remain unpaid and are reported as collections, they can lower your credit scores.

4. Credit Score Impact:

• The impact of medical bills on your credit scores can vary depending on several factors, including the amount of the debt, your overall credit history, and the specific scoring model used by lenders.

5. Managing Medical Bills:

• To minimize the negative impact of medical bills on your credit scores, consider the following:

  • Work closely with your insurance provider to ensure that all eligible medical expenses are covered.
  • Review medical bills carefully for errors and discrepancies.
  • If you have medical bills that you cannot pay in full, contact the medical provider to discuss payment options or negotiate a payment plan.
  • Be proactive in addressing medical bills to prevent them from going to collections.

6. Credit Score Recovery:

• If medical bills have negatively impacted your credit scores, responsible credit management, such as making on-time payments on existing accounts and keeping credit card balances low, can help you rebuild your credit over time.

In summary, while medical bills can affect your credit scores, recent changes in credit reporting practices and scoring models have made some improvements in how medical debt is treated. It's essential to be aware of these changes and take proactive steps to manage and resolve medical bills to minimize their impact on your credit.