Maybe you received a surprise medical bill that’s far larger than you can afford to pay (you’re not alone, over 43 million Americans have overdue medical debt on their credit reports).
Or perhaps you didn’t even receive the bill from the hospital and all of a sudden it’s in collections (this scenario is unfortunately one that we deal with all the time).
Or you ignored the collections notices and now an unpaid medical debt is showing up on your credit report that you want to get rid of.
Even after reducing and paying your bill (we can help with that) – you still want to make sure that your credit isn’t hurt.
The good news is that it takes time before any unpaid medical debts can show up on your credit. And, even if it does show up on your credit – medical debts won’t hurt your credit score as much as other types of debts.
In this post we’ll dive into the details surrounding
- When exactly unpaid medical bills might show up on your credit report
- How those bills will affect your credit
When Do Hospital Bills Go On Your Credit Report?
The good news is that even after getting sent to collections, it takes quite a while before an unpaid hospital bill can go on your credit report (though not forever).
While a hospital can technically report you to the big three credit reporting agencies immediately after your bill is due, most of them take a few extra steps before doing so.
Even better, those big three credit reporting agencies must wait at least 180 days before they can put an unpaid medical debt on your credit report. This rule is the result of a settlement between these three credit reporting agencies and the state of New York. So even if a medical debt gets reported to a credit bureau, if you pay it off within 6 months, nothing will show up on your credit report.
Let’s breakdown the typical steps that will happen before a bill gets sent to collections.
Bill Due Date – most hospital bills are due net 30 (that is, the due date of the bill is 30 days after receipt). Even hospital bills that claim “due upon receipt” won’t send you to collections immediately after sending you a bill – after all, they want to collect as much as possible and sending someone to a collections agency costs the hospital extra money.
‘In-House’ Collections – Usually a hospital will spend anywhere from 1-6 months trying to collect on the bill with an ‘in-house’ collections agency (sometimes these can be separate companies contracted by the hospital to collect). Sometimes rather than collections, this time is spent for the hospital billing department to get its act together and send your account out to a different collections agency. Also, usually (though not always), the hospital won’t report the debt to a credit bureau (and even if they do, the 6 month waiting period mentioned above still applies). If this is a third party collections agency, they are required by law to send you a written validation notice within 5 days of first contacting you.
Third Party Collections – After ‘in-house’ collections, the hospital will send your bill to a third party collections agency. Many times they’ll sell the debt for pennies on the dollar. Here, the collections agency will almost certainly report your account to a credit agency – though as before, the 6 month mandatory waiting period before anything actually shows up on your credit still applies. Like with the above, the third party collections agency is required to send you a written validation notice within 5 days of first contacting you.
In sum – at a minimum, it takes 6 months from a bills due date before anything can show up on your credit report. Furthermore – in most instances it will take 9 months to a year before an unpaid bill shows up on your report. This should give you ample time to audit your bill for errors, ensure proper insurance coverage, and negotiate with the hospital.
However, 6-12 months is still a broad time frame. One way to be safe is assume that you have 6 months from the date on your first written validation notice to get everything settled.
How Medical Collections Affect Credit
However, despite your best efforts to get things figured out, something may pop up on your credit report surrounding medical debt.
There’s good news here, as well. FICO (the company that calculates the number for your credit score) recently released new standards that include removing any negative impact on your credit after paying off your medical debt in full. So – even if you have debt on your credit, it will be removed once you pay it off in full (or settle for a reduced payment amount with the debt collector so that they consider the debt ‘paid off in full’).
Even if you have unpaid debt on your credit, the new FICO standards differentiate between unpaid medical debt and unpaid non-medical debt. FICO scores are split into versions. FICO score 8 is the most commonly used FICO scoring. However, FICO 9 has recently been released and is starting to become more widely adopted. Perhaps in recognition of how convoluted and messed up the medical billing system is, FICO 9 weights unpaid medical collections less than other types of collections accounts.
That means that even if you have unpaid medical debt on your collections report – pretty soon it will count for significantly less than other types of debt in harming your credit score.
Finally – unpaid medical debt can only remain on your credit report for up to 7 years after the original delinquency.
- You have at least 6 months from when a debt collector reaches out to you until anything will show up on your credit report (and in many instances even more time)
- If you have a medical debt on your credit report, paying it off will remove it
- New credit reporting standards are counting unpaid medical debt less than other types of unpaid debt
- Unpaid medical debt is removed from your credit report after 7 years under all circumstances
Braden founded Resolve after experiencing first hand how unfair the system is for patients. Prior to Resolve, he built and ran Operations for a renewable energy company and then built and ran Product, Growth, and Operations for a VC-funded edtech company. He received his MBA from Dartmouth’s Tuck School of Business and BA in Philosophy from the College of William and Mary. When not trying to lower healthcare costs he can be found outdoors mountain biking, skiing, or hiking with his dog.