Can Unpaid Medical Bills Hurt Your Credit?

If you do not have insurance or your insurance does not completely cover a hospital visit or expensive treatment plan, you could end up with unexpected medical bills that you cannot afford to pay. Unfortunately, unpaid medical debt that ends up on your credit report can severely damage your credit rating--leaving you ineligible for loans and lines of credit you apply for in the future.

Collection Accounts

Hospitals and doctors offices do not directly report to the credit bureaus. After all attempts to procure payment from you fail, however, your medical provider will sell the unpaid account to a collection agency.

Collection agencies report medical debts to the credit bureaus as collection accounts. Collection accounts are derogatory entries within your credit record. Provided the collection account in question exceeds $100, it will have a negative effect on your credit scores.

Reporting Period

Medical collections are subject to a limited reporting period. Under the Fair Credit Reporting Act, a collection account can only remain a part of your credit file for seven years from the date the debt was first classified as 180 days past due. Thus, the credit bureaus must remove all damaging medical collections from your credit report seven and a half years from the date the debt was originally due.

Credit Damage

Although an unpaid medical bill will damage your credit rating if it ends up with a collection agency, the degree to which each debtor's credit scores will suffer varies considerably. When calculating credit scores, the credit bureaus use a mathematical formula that has never been publicly released. Aspects of the formula, however, are public knowledge. For example, because recent debts carry greater weight within the formula, the more recently a medical collection was inserted into your credit file, the lower your credit score will be.

Paying Medical Bills

If you cannot pay off your medical debt in full, you have the option of negotiating a payment plan with your medical care provider. Through a payment plan, you can pay off the debt you owe via periodic payments over time. This helps you satisfy your debt and protects your good credit rating--since a creditor that receives regular payments has no incentive to turn your account over to a collection agency.

Unfortunately, once your medical debt results in a collection account that subsequently appears within your credit record, paying off the debt does not improve your credit score or result in the account's removal from your report.