Medical debt is a huge issue for many Americans. In fact, some people even file bankruptcy over it. Many people don’t realize that medical bills can have a serious impact on their credit scores.

If you’re struggling with medical debt, it’s important to take action and understand how this debt can affect your credit rating, and how that can impact the rest of your life. Here you will find a brief discussion of how medical bills and debt can impact your credit score, and some tips on how to improve your credit rating and handle your medical debt responsibly.

What is medical debt?

Medical debt is a type of debt that comes from owing money for medical procedures, medications, doctor’s visits, and other types of healthcare. Not only is healthcare among the largest costs for Americans, but medical debt can also lead to bankruptcy. Furthermore, Americans spend far more on healthcare as a measure of GDP than other developed countries, with healthcare costs equaling over 17% of the GDP in 2021.

This article is about understanding the severity of healthcare costs helps to underscore the widespread nature of medical debt in the USA. Whether you find yourself struggling with medical bills due to high out-of-pocket costs, lack of an insurance company, or unexpected injury or illness, you don’t have to let medical debt ruin you.

How is medical debt different from other kinds of debt?

Medical debt is different than other kinds of debt because it is often very difficult to know exactly what a one-time medical procedure is going to cost before agreeing to it. Additionally, when the choice is between debt and your health, there’s not really much of a choice at all.

The way most health insurance works in the U.S. is that you have a deductible, which is a certain cost that you are responsible for before insurance kicks in. From there, your insurance typically covers all or some of the remaining costs. The issue is that you might not know what portion your insurance will cover until you have already done the procedure.

Another issue that makes unpaid medical bills and debt particularly frustrating is that it can be difficult to find public and easily accessible information on the average cost of medical procedures across the country. Even if you can find prices of procedures across different hospitals and providers, the cost discrepancy between them can be so massive that you are left with questions.

Does medical debt affect your credit score?

Yes, medical debt does affect your credit score, and usually, it can impact your credit score in the same ways other debt will. That being said, there are some changes that have been made and that are in the pipeline to lessen medical debts’ impact on credit. Luckily, medical debt doesn’t show up in your account immediately after you are issued a bill.

There is a 365-day grace period before you will see your medical debt reported in your credit history, which gives you and your insurance time to pay off your bills and set up payment plans before there are consequences. However, once that 365-day grace period has passed, the impacts can be huge and can stay on your consumer credit report for seven years.

What if a medical bill is wrong?

Hospitals make mistakes, insurance companies make mistakes, and credit reporting agencies make mistakes. This means that sometimes medical bills and payment histories can simply be wrong. An issue with a billing code, a computer malfunction, or even fraud can all lead to medical expense charges that are inaccurate, and these can eventually find their way into your credit report.

If you suspect a medical debt reported on your credit reports is incorrect, you should file a claim with each credit reporting bureau with the wrong information immediately to get it removed. You will likely need to provide evidence that the bill is incorrect or fraudulent, so be sure to keep good records of all your medical bills.

What does it mean when medical debt goes into collection?

One common question that many people have when they get medical bills is what it means if they have medical collection debt. You may have received mail that your unpaid medical debt is in collections or is about to be sent to collection. What this means is that your medical provider or whoever the medical bill is from has not received payment for a certain period of time, and is therefore going to sell your debt to a debt collection agency.

Unlike regular creditors, healthcare providers are not equipped with the resources to make unpaid medical collections. In order to get some payment back when they suspect there won’t be payment on the debt, they sell it at a discount to a debt collector. Their only job is to purchase debt at discounts and then pester and threaten the debtor until they pay.

Until your medical debt goes into collection, it shouldn’t appear in your credit report. Once it has gone into collection, it will — meaning that only once you have let a bill go into collection will the medical debt have an impact on your score.

Tips for managing medical bills and personal finances

Medical debt can be a major nuisance and source of stress, but it can be managed. Use these tips to take control of your medical debt.

Know what you owe

Your credit report is a summary of your credit history. It includes information about your credit accounts, as well as any public records, such as bankruptcies or foreclosures. Obtaining a copy of your credit report is the first step in understanding your credit situation. It can also help you to spot errors and identify potentially fraudulent activity.

You are entitled to one free credit report from each of the three major credit bureaus (Equifax, Experian, TransUnion) every 12 months. You can request your report online, by phone, or by mail. Once you receive your report, review it carefully to ensure accuracy and completeness. If you find any errors, be sure to dispute them with the appropriate bureau. By monitoring your FICO credit report regularly, you can stay on top of your financial health and catch any problems early.

Create a budget

Many people find it helpful to create a budget to help save money to put toward their payments. This can give you a better idea of how much you can afford to pay each month. There are a number of different ways to create a budget. You can use a budgeting app, or you can simply create a spreadsheet.

Once you have created your budget, be sure to update it regularly so that it remains accurate. In addition, try to stick to your budget as much as possible so that you don’t end up overspending. If you find that you are struggling to stick to your budget, there are a number of resources available to help you get back on track.

Negotiate with creditors

When you’re struggling to make ends meet, it can be tempting to just ignore your bills and hope that they go away. This is a dangerous strategy that will only make your financial problems worse. Instead, you need to take a proactive approach and talk to your creditors.

Explain your financial situation and try to negotiate a lower interest rate or payment plan. If you can’t reach an agreement, ask about other options, such as deferring payments or consolidating your debts. By taking the time to talk to your creditors, you can ease your financial burden and get back on the road to financial stability.

Consider consolidating debts

If you’re struggling to keep up with multiple debt payments, consolidation might be a good option for you. Consolidating your debts means opening a new credit card or taking out a new personal loan from an online lender to pay off your existing debts. This can help make your payments more manageable by giving you one monthly payment to focus on. It can also save you money by reducing the overall interest you’re paying on your debt.

When considering consolidation, it’s important to compare interest rates and terms to make sure you’re getting the best deal possible. You should also consider whether consolidating will help you focus on paying off your debt or if it will simply extend the amount of time you’re in debt. If done carefully, consolidation can be a helpful tool in getting your debt under control.

Know when to get professional help

Many people find themselves in debt at some point in their lives. While some debt may be manageable, other debts can quickly spiral out of control. If you find yourself struggling to keep up with your payments, it may be time to seek professional help. Financial advisors can provide advice on how to best manage your money and debt.

Credit counseling services can work with you to develop a plan to pay off your debt. Both options can provide invaluable assistance when you’re trying to get out of debt. If you’re feeling overwhelmed by your financial situation, don’t hesitate to seek professional help. It could be the best decision you ever make.

Medical debt & credit: the bottom line

Nobody wants to feel stuck with medical debt. Not only can medical debt impact your well-being, but it can lead to a bad credit score. Be sure to pay credit card debts and other forms of debt and use good credit habits to maintain a good credit score.

If you need a credit card that can help grow your credit while also giving you cash reward offers, Vital Card might be right for you. Learn about the way Vital is reimagining the way you earn cash rewards with every purchase, every day.


What is a credit score? | Consumer Financial Protection Bureau

How Does Medical Debt Affect Your Credit Score? | Experian

FastStats – Health Expenditures | CDC

Can You Declare Bankruptcy On Medical Bills? | Experian

Pros and Cons of Debt Consolidation | Experian

Vital Card blog posts are intended for informational purposes only and should not be considered financial or any other type of advice.