Yes. That’s right — unpaid medical bills go on your credit report and can potentially hurt your credit score. Medical expenses actually account for a significant percentage of bankruptcy filings in the United States.
While doctors and hospitals don’t report debts to consumer credit bureaus, it’s fairly common for healthcare providers to turn over an unpaid debt to third-party collection agencies who will share this information. When this happens, your failure to pay a bill will affect one of the most important factors in determining your credit score: your payment history.
Medical Bills on Credit Report in Practice
Let’s say you have yet to pay the bill from your most recent visit to the dermatologist. If the bill remains unpaid for long enough, your doctor may turn over your unpaid debt to a collections agency; in all likelihood, a collector will then contact you in an effort to get you to pay up. At this point, your credit report may indicate your unpaid bill as having gone to collections.
The extent to which medical debt can affect your credit score depends on the type of scoring model used by a potential creditor to check your creditworthiness. FICO 8, the scoring model which many lenders rely on, records all collections, regardless of whether the charges were eventually paid. That is to say, even if you eventually paid off your debt, your credit report may reflect that the bill you paid off went to collections. Collections accounts can take up to seven years to drop off your credit report, although the impact on your credit score will lessen over time. FICO 9, which is the newest scoring model, puts less weight upon medical debt but is not as widely used as FICO 8.
As of September 15, 2017, the three major credit reporting agencies – Equifax, Experian, and TransUnion – must allow a 180-day waiting period to elapse adding unpaid medical debts to people’s credit reports. The waiting period affords patients/policyholders some time to resolve outstanding medical bills with their healthcare and insurance providers.
If you’re having a difficult time paying for medical bills, or if you find yourself underinsured, there are several free or discounted healthcare options that may be available to you.