What to know about how medical debt affects your credit score


Starting July 1, the three biggest credit reporting agencies — Equifax, Experian and TransUnion — are changing the way medical debt affects people’s credit scores.

Medical debt has become pervasive as health care and insurance costs continue to rise, while incomes have failed to keep up with inflation. According to the Peterson-Kaiser Family Foundation Health System Tracker, about 23 million people in the United States, or about 9% of the population, owe at least $250 in medical bills.

Black people, women, people with complex medical conditions and low-income people are most likely to have medical debt and report the highest amounts of medical debt, the survey found. When this debt is factored into credit scores, already vulnerable people may find it even harder to get a car loan, mortgage or new line of credit.

Here’s what you need to know about changes to how medical debt affects credit scores.

What is changing in the way credit reporting agencies report medical debt?

Starting July 1, medical debt will be removed from your credit report as soon as it is paid. This applies to new debt or existing debt that could lower your credit score.

At the same time, medical debt will not be recorded in your credit score until it has been past due for one year. Previously, medical debt could show up in credit scores after six months.

Starting next year, only medical debts of at least $500 can be considered in your credit score.

Why are credit agencies changing the way medical debt is accounted for?

Debts such as unpaid credit card or utility bills, and missed car loan or mortgage payments are seen as a reflection of a person’s financial responsibility and stability, Jim Francis said. , partner in the law firm Francis Mailman Soulimas. But research has shown that most medical debt does not reflect a person’s financial acumen. Medical bills are often unexpected, the cost of care can be difficult to know in advance, and billing errors are common.

How do credit agencies find out about medical debt?

Most medical providers do not report medical debt to credit reporting agencies. But when hospitals or medical practices sell medical debt to a collection agency (usually only after several months of late payment), it can be reported.

What can I do to make sure medical debt is not reflected in my credit score?
Check your credit score regularly. Free reports are available at annualcreditreport.com/index.action. You may have heard that checking your credit score can lower it. Not true. “Hard” requests – when a lender checks your credit report – can lower your score by a few points. But consumers can check their own credit report as many times as they want without penalty.

Pay your bills as soon as you can. If you can’t afford to pay the full bill, contact the provider to find out if you qualify for financial assistance or a payment plan.

What should I do if I think my medical bill is wrong?

Contact the provider and your health insurer immediately if you think you’ve been billed in error, Francis said. Incorrect medical bills can take months to correct, and postponing the task will only delay the process further.

If your debt has already been sent to a collection agency and reported to credit reporting agencies, file a dispute with the three national credit reporting agencies by calling or visiting their websites, he said. Learn more about your rights on the Consumer Financial Protection Bureau website, consumerfinance.gov/medicaldebt.


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