You may wonder if unpaid medical bills affect credit scores. The truth is that hospital bills can affect your credit. But don’t worry! Just because you have a medical bill does not mean your credit will drop. There are several steps in between receiving a hospital bill and your credit lowering.
Most of us are familiar with what it’s like to receive a medical bill. They tend to be unwanted and unexpected financial burdens. But unfortunately for many Americans, they’re a regular part of life. In fact, roughly 23 million people owe more than $250 in medical costs.1 But the way we deal with medical statements can affect our financial lives for years to come.
Read on to learn more about medical bills, how they affect your FICO score and credit reports, and how to pay them off.
What Is Medical Debt?
Medical debt is any debt that you owe from receiving medical care, services, or products. Any debt has the potential to lower your credit score. This is why it’s so important to take care of it immediately.
If you have health insurance, it can help to curb some of the costs of medical care. But even having health insurance doesn’t guarantee that you won’t have medical debt. There are some things that your health insurance company will pay for and some that they won’t.
What Happens To Unpaid Medical Balances?
Many patients today are left wondering what happens to their unpaid medical bills. An unpaid medical bill can eventually show up on your credit reports and even lower your overall credit scores.
The process for medical bills is as follows:
| Stage | Description | Consequence |
| Bill Issued | After receiving medical services, the medical provider issues a bill for the amount owed. | No immediate impact on credit, but it’s a debt that needs attention. |
| Insurance Processing | If you have health insurance, the bill is sent to your insurance company for processing. | The insurance company may cover part or all of the bill, reducing your personal liability. |
| Payment Due | The bill becomes due, typically within 30-60 days after issuance. | If unpaid, the doctor may send reminders or follow-up notices. |
| Delinquency | The bill remains unpaid past the due date. | The medical office may continue to send notices. No direct impact on credit yet, but risk increases. |
| Debt Collection | After a certain period (often 60-180 days), the provider may transfer the debt to a collection agency. | The collection agency may report the debt to credit bureaus, potentially affecting your credit score. |
| Impact on Credit Reports | The collection agency reports the unpaid debt to credit bureaus. | The medical debt appears on your credit report, likely lowering your credit score. |
| Long-term Credit Impact | Unresolved medical debt remains on your credit report. | Can impact credit score for up to seven years, affecting loan eligibility, interest rates, etc. |
| Possible Legal Action | If the debt remains unpaid, the collection agency might pursue legal action. | Could lead to wage garnishment or liens, further impacting financial stability. |
Will an Unpaid Medical Bill Affect Your Credit Score?
A medical bill can ultimately lower your credit score if you don’t pay it and it moves to a debt collection agency.
By not paying your medical bills, you’re ensuring that those debts will end up on your credit report. And having a debt in collections on one or more of your credit reports will lower your overall credit scores. When lenders, landlords, and even employers see medical collections in your credit history, it tells them you may not manage your money well.
Not only will these collection accounts show up on your credit reports and lower your credit scores, but they may end up taking money out of your paychecks.
If your medical expenses aren’t paid and they move over to a collection account, it’s crucial to pay them immediately. In addition to this debt being reported to the credit bureaus, the collection agency will eventually try to garnish your wages. This is the most damaging way that medical bills affect people.
Wage garnishment means that you’ve failed to settle the collection account, and the company will try to sue you and pull money directly from your paychecks. If they succeed, a portion of each of your paychecks will go straight to the collection company to settle the unpaid medical debt.
To avoid your credit scores dropping and wage garnishment, it’s essential to find unpaid medical bills and settle right away.
How To Pay Unexpected Hospital Bills
There are several ways to pay down your medical bills to avoid negative marks on your credit reports and credit history. Read on to learn how most people pay for medical care today.
If you have any cash left over after budgeting for the month, then that money should go toward settling your medical bills. Your credit reports and your future paychecks will thank you. It may not be fun to put your extra cash toward a medical bill, but it’s a wise financial move.
If you don’t have leftover money at the end of the month for medical bills, then you may be wondering how to pay your medical debt. Fortunately, there are still options out there for you.
Personal Loans for Medical Bills
Many people who are struggling with paying off medical bills turn to personal loans. If you find the right personal loan, it can be an excellent way to pay off your medical costs and avoid having them show up on your credit report.
There are a lot of personal loans out there that can be used to pay off medical bills. But you’ll need to make sure that you’re using a trustworthy loan and lender. If you can get a bank or credit union loan, then those are usually safe and affordable.
But many banks and credit unions will require their borrowers to have a decent credit report to receive a loan. So if your payment history and credit score are less than ideal, you may not get approved. In this situation, many borrowers turn to personal loans.
These loans are designed for borrowers with less-than-perfect credit scores. They also tend to offer a flexible payment plan that allows borrowers to repay the loan over a longer time. This can make your payment plan more manageable. You can even apply for an loan online.
Just remember to do thorough research no matter what type of loan or lender you’re considering.
Borrow From Friends or Family
If you know a family member or friend who can help you out, this may be a great option to pay your medical debt. The only caveat is that sometimes money can affect personal relationships in a negative way.
If you’re worried that borrowing money may strain your relationship, then it may be best to avoid this option. But if this won’t be an issue, then accepting help from a loved one can be a great way to settle your debts.
Negotiate With the Health Care Provider
You may be surprised to learn that many hospitals and medical facilities are willing to lower your overall medical bills if you ask.
Calling the health care provider and speaking to the person in charge of billing can help significantly. Be kind and polite, and explain your situation. Let them know that there’s no way you can afford to pay the bills in full. Ask them if they can cut your bills in half. They may not be willing to lower them by that much, but many hospitals will reduce them at least a little bit.
FAQs About How Medical Debt May Affect Your Credit
Medical debt can remain on your credit report for up to seven years. It’s important to know that even after you’ve paid off the debt, the record of it may still appear on one or more of your credit reports for this duration.
Typically, a medical provider does not report directly to the credit bureaus. Instead, if the bill remains unpaid, they may turn it over to a collection agency, which can then report it to the major credit bureaus.
Your insurance company is not usually notified of unpaid medical balances. However, it’s crucial to check with your insurance provider to ensure all eligible bills have been covered as per your policy.
You can check the impact of unpaid medical bills on your credit by obtaining a copy of your consumer credit reports from the major credit bureaus. This will show you all debts, including medical, that are affecting your credit.
Not all unpaid medical balances are reported to credit reporting agencies. It often depends on the policies of the medical provider or the collection agency involved. However, it’s best to assume they might be and take steps to address any unpaid bills promptly.
If you find an error, such as a bill you’ve already paid or one that isn’t yours, you should dispute it directly with the credit bureau. It’s important to provide documentation to support your claim.
To prevent medical debts from harming your credit, try to negotiate payment plans with your medical provider, keep track of all bills and insurance statements, and address any unpaid bills as soon as possible.
What CreditNinja Wants You To Know About Outstanding Medical Debt
Medical bills affect many other parts of your financial life. For example, if left unpaid, they get reported to the credit bureaus, show up on your credit report, and may lead to medical collection accounts and wage garnishment. And the effects of having a bad credit score could last for years.
It’s crucial to remember that leaving these bills unpaid means that your credit scores with the major credit scoring agencies will eventually lower. Avoid this by paying unpaid medical debt as soon as you possibly can. If you need money to afford the cost, apply for online loans with CreditNinja!
We offer versatile personal loans for outstanding medical bills and other unexpected expenses. You could get a flexible repayment plan that allows you to avoid damaging your credit score from unpaid medical debt. Inquire online to check if you qualify!
References:
The Burden of Medical Debt in the United States │ KFF
