News & Trends

Medical Debt and Your Credit Score: Here’s What You Need to Know

The ongoing political debate in Washington is causing a lot of uncertainty about health care. But Americans are about to get some relief from the potential harm medical costs can impose.

On September 15, 2017, the three major credit bureaus—Experian, Equifax and TransUnion—will add a 180-day grace period for consumers to resolve any medical debt before it appears as a past due amount on their credit report.

The six-month wait is designed to help people with a common dilemma—the need for time to make necessary payments or finalize issues with insurers. Once a medical debt gets paid, check that the listed account is removed from your credit report. If an account is 180 days old and unpaid, it will be added to a consumers credit file.

Forty-three million Americans have unpaid medical debt on their credit files, according to a 2014 study by the Consumer Financial Protection Bureau. The study also found that 52% of all debt on credit reports was related to medical expenses.

Under the current system, consumers can find themselves trapped in limbo, stuck with bills will waiting for their healthcare provider to reimburse them for approved expenses. During this period, any gathered debts that are left unpaid can hurt their credit scores.

In fact, there is more than $127 billion in debt listed as medical type in the collection stages as of June 2017, according to Experian data. At the same time, medical debt collection complaints ranked as the third highest per the CFPB database in 2017.

Number of Complaints per Debt Collection Type

*Data through June 2017

These changes to how medical debts a handled stem from the National Consumer Assistance Plan, a 2015 agreement between with the three major credit reporting agencies, New York State Attorney General, and a group of state Attorneys' General. That agreement led to a variety of enhancements to the credit reporting system undertaken by the three credit reporting agencies.

What can I do?

Just like your health, you want to make sure that there isn't anything that may cause your credit scores to drop. Typically, hospitals or doctors refer unpaid bills to debt collection agencies, and they will report that debt on your credit report. Once a medical debt gets paid, check that the listed account is updated on your credit report to reflect paid.

Additionally, make sure to keep up to date on your medical bills and check to see whether you have a balance that is owed. You also want to be aware of warning signs such as identity theft or unpaid medical bills reported that you can dispute. If something doesn't look right, you should look into it and learn how to dispute credit report information.