How Medical Bills Injure Your Credit Score

Doctor's Bills

Unpaid medical bills can negatively affect your credit score.

We’ve all had frustrating moments checking our credit scores. Sometimes it seems rocket science would be easier to understand than the formula credit bureaus use to calculate your score.

Even though it may seem unchangeable and confusing, having a better understanding of what goes into your credit score can help you repair your score the smart way and avoid credit problems in the first place.

Paying off medical bills is an increasingly important piece of the credit puzzle. Here are some key things to remember about how medical bills can change your credit score:

Avoiding Collections

Simply having medical debt won’t necessarily affect your score. Typically your credit score will be made up of installation and revolving debts like mortgages, student loans, car loans and other big-ticket expenses. Payment history on medical bills only becomes a problem when debts are turned over to a collection agency.

For this reason, medical debt can be a dangerous addition to your credit score. Even if you were making on-time payments for years, only the missed payments and amount reported by the collection agency will be considered.

Another reason medical bills can be a dangerous addition to your credit score is the typically high amounts. It’s estimated that amounts owed make up about 30 percent of your credit score and medical bills can creep into the thousands very easily.

Collection phone calls

Check in regularly with your doctor’s office to avoid having unpaid dues turned over to a collection agency.

Regular check-ins with your insurance company and doctors offices can prevent unnoticed bills from negatively affecting your score. Physicians may also agree to set up a flexible payment plan if your insurance won’t cover a particular bill.

Fresh Start

If unpaid medical bills have already affected your credit score, work with the collection agency to start paying immediately. These debts can stay on your credit report for up to seven years.

Let the importance of your credit score be your No. 1 motivator for keeping up with medical payments. Poor credit can hurt future goals like buying a car or using your VA home loan benefits. The VA loan program doesn’t have a set credit requirement, but lenders certainly do.

Remember that your score isn’t permanent and you can always work to improve it.

Photos courtesy of Alex E. Proimos and Esparta