Can medical bills impact my credit score?

When Medical Debt Ends Up in Collections It Could Hurt Your Credit Scores

Ah, medical bills—the unexpected guests that show up at your financial party, eat all your snacks and sometimes forget to leave. As a credit expert with 15 years of seasoning (and a pinch of humor to taste), I've seen how these uninvited guests can impact your credit score, sometimes lurking in the background without you even noticing until they've made themselves quite comfortable with your credit report.

The Short Answer: Yes, But It's Complicated

To put it simply, yes, medical bills can impact your credit score, but the relationship between the two is more like a complicated dance than a straightforward march. It's important to note that the mere presence of medical bills isn't what affects your score; it's how they're handled (or mishandled) that does the tango with your credit.

The Waiting Game

Historically, medical bills had a bit of a grace period when it came to your credit report. Thanks to the peculiarities of insurance claims and hospital billing, it could take a while for these expenses to show up. However, once they do—and if they're unpaid—they can be reported to credit bureaus as collection accounts. But here's the twist: recent changes mean there's now a 180-day waiting period before unpaid medical debt can ding your credit score, giving you some time to sort things out with your insurance or arrange payment plans.

The Dance of the Credit Score

Imagine you're at a ball, gracefully navigating the dance floor—that's you managing your credit. Suddenly, a wild medical bill appears, stepping on your toes and making you stumble. This stumble, in credit terms, is the potential drop in your score if the bill goes to collections. It's not the bill itself that's the problem; it's the failure to pay it, resulting in a collection account on your credit report.

Choreographing a Solution

So, what can you do to avoid this dance altogether? First, keep in close contact with your medical provider and insurance company to ensure all claims are processed correctly and promptly. If you receive a bill you can't pay immediately, don't bury it in your dance card hoping it'll go away. Many hospitals and providers offer payment plans or financial assistance—like asking the DJ to play a song that's easier to dance to.

The Encore: Recent Changes

In a move akin to changing the tempo of the music, recent updates to credit reporting rules have made it so that medical debt under $500 and medical debts paid by insurance won't be reported. Furthermore, starting in 2023, paid medical collection debt will be removed from consumer credit reports altogether, and the waiting period before unpaid medical debt can appear on reports will extend to a full year.

Wrapping Up the Night

In the grand ball of life, managing medical bills with care can help you maintain your credit score's rhythm. Remember, it's all about how you handle the situation. With the right steps, you can keep your credit score dancing gracefully, even when those unexpected medical bills cut in.

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