Updated January 11, 2021: Getting a sky-high medical bill is the monetary equivalent of a swift kick to the gut. After all, a medical problem isn’t exactly something you can avoid. Still, show up to an emergency room out of network, assume that preventative care is covered by your health insurance, or take an ambulance ride and — whack — a medical bill of hundreds or even thousands of dollars could wind up in your mailbox.
Most people can’t readily cover an expensive medical bill — or any $400-plus emergency, for that matter. But leave that balance unpaid long enough and you’re facing another gut-punch. Because, yes, medical debts can wind up on your credit report … and hurt your credit score.
Does medical debt go on my credit report?
Let’s start with the bad news. Healthcare providers aren’t in the habit of reporting to the major consumer credit bureaus (Equifax, Experian and TransUnion). But they are in the habit of selling unpaid debts to third-party collectors and those collectors will often tell on you.
Collections accounts, paid or unpaid, can remain on your credit reports for up to seven years from the date the bill first went delinquent. (Healthcare providers generally give you 180 days to pay up before they consider an account in default and move to sell it to a debt collector.) That account can hurt your credit score the entire time it’s on your credit report. However, the effects will wane as you get further and further away from the original delinquency date.
That sounds awful and unfair, we know, since you don’t exactly have control over your health. But there is some good news.
Medical debts are different.
Back in December 2014, the Consumer Financial Protection Bureau found medical debt was unduly hurting about 15 million consumers’ credit scores — and put some pressure on the credit reporting/scoring industry to address the issue.
That August, credit score giant FICO announced the newest version of its score — the creatively named FICO 9 — would weigh unpaid medical collection accounts less severely than other outstanding collections. It would also ignore paid medical collection accounts entirely. FICO’s main competitor VantageScore had actually instituted a similar policy when debuting its (also creatively named) VantageScore 3.0 the year before.
Beginning this September, credit reporting policies around medical debt are changing, too. Thanks to a settlement the three big credit bureaus reached with 31 state attorneys general in 2015, medical debt won’t post to your credit reports until a 180-day waiting period elapses. Plus, once a medical debt gets paid by your health insurance company, the bureaus will remove it from your credit report.
In other words, medical debt can still appear on your credit reports, but you’ve got more time to shore the account up and your credit score might suffer less from it.
How can I avoid medical debt on my credit report?
Of course, that doesn’t make a mega medical bill any easier to stomach. You’ve still got to pay and there’s no guarantee an outstanding balance won’t affect your credit at all. (FICO 9 and VantageScore 3.0, after all, are just two of the many, many credit scores out there.) Fortunately, there are a few ways to minimize incurring a medical bill you can’t readily afford and keep it off your credit report.
Understand your health benefits.
Yeah, we know, it doesn’t exactly make for exciting reading, but your explanation of benefits provides invaluable information about how your healthcare plan works, including your deductibles, copays, and costs for going out-of-network. And the best way to avoid a bill winding up on your credit report is to, well, avoid a bill you can’t afford to pay in the first place. You can find a full explainer on how to tell a doctor’s visit will cost an arm and a leg right here.
Make sure your healthcare coverage is adequate.
Maybe that high-deductible plan isn’t such a good idea now that you’re getting older. Same goes for that low-tier coverage you signed up for when you first started your job or initially visited the Obamacare exchanges. If so, see if you can upgrade to a more comprehensive plan during open enrollment. If you’re not sure how to do that, check out our primer on shopping for health insurance.
Open a Health Savings Account or Flexible Spending Account.
HSAs and FSAs are designed specifically to help people deal with out-of-pocket medical expenses. They’re especially handy if you have a high-deductible health insurance plan.
Don’t ignore mail from your insurer.
Sometimes medical debt winds up on someone’s credit report simply because they didn’t realize they owed a doctor, testing facility, or hospital. Sure, nine out of ten of the mailers your health insurer sends you is of the "This is not a bill" variety, but you’ll still want to open up all correspondence from them just in case one isn’t.
Negotiate with the healthcare provider.
If you get a sky-high medical bill, don’t freak out, decide you’ll never have enough money to pay, and ignore the charge forever. Instead, call your healthcare provider. You can often negotiate the balance – seriously, offering a lump sum upfront helps — and, if you can’t, well, at least see if the provider will agree to a payment plan in lieu of selling the debt to a collector. Bonus tip: Be sure to get this agreement in writing.