How Does Medical Debt Affect Your Credit Report?

Apr 8, 2024

According to a report published by the Kaiser Family Foundation, Americans owe at least $220 billion in medical debt. In the United States, approximately 14 million people have medical debt exceeding $1,000, and approximately 3 million have debt exceeding $10,000. The burden of medical debt is becoming increasingly prevalent in the United States.  These numbers not only reflect the existing financial challenge but also underscore the deeper consequences. Which is the impact of medical debt on one’s credit report. To effectively monitor your credit score and grasp its determinants, it’s essential to delve into how medical debt can affect it. This article looks closely at medical debt and how it affects your credit report. 

How Medical Debt Functions

Step 1

Medical debt arises when the patient is unable to pay the full cost of medical services received. The bill sent by the healthcare provider includes the total cost, any insurance adjustments, and the patient’s remaining responsibility. The provider also submits a claim to the patient’s health insurance company. The claim details the service provided and the associated charges. 

Step 2

The insurance company evaluates claims against the patient’s policy benefits to decide on coverage. They may fully approve the claim, paying the healthcare provider an agreed “allowed amount,” or deny it due to issues like lack of medical necessity or documentation. Sometimes, they only partially approve, covering a portion of the expenses and leaving the patient to pay the rest, known as “co-insurance” or “co-pay.”

Step 3

Many patients believe that having health insurance means their medical expenses will be fully covered. Unfortunately, that isn’t true. Once the insurance company reviews the claim submitted by the healthcare provider, they send an EOB to the patient. Patients should thoroughly review the EOB (Explanation of Benefits) document to understand their financial obligations. 

Step 4

If the patient fails to pay the outstanding balance within the specified period, the healthcare provider may issue further bills, directly reach out to discuss payment plans or transfer the debt to a collection agency.

Medical Debt’s Affect on Your Credit Report

Traditionally, unpaid medical debt could be reported on your credit report as early as six months after the original service date if it went to credit collections. This negative mark could significantly impact your credit score, making it harder to secure loans, rent an apartment, or obtain other forms of credit.

Recent Improvements in Medical Debt Reporting

A major shift occurred when the three major credit bureaus (Equifax, Experian, and TransUnion) announced improvements regarding medical debt on credit reports starting from July 2022. 

  • Removal of Paid Medical Debt

Any paid medical collections were removed from credit reports entirely. This means past medical bills you’ve settled no longer have a negative impact on your credit score.

  • Increased Waiting Period for Unpaid Debt

The waiting period before unpaid medical debt can be reported on your credit report increased from 6 months to one year. This gives you more time to work with your healthcare provider or insurance company to resolve the issue and potentially avoid collections altogether.

  • Medical Debt Under $500 Excluded (April 2023)

Starting in the first half of 2023, medical debt collections under $500 are no longer included on your credit reports. This eliminates the negative impact of smaller medical bills that might have previously dragged down your score.

Tips to Handle Your Medical Debt

Understand Your Debt

Start by thoroughly examining your medical bills and the Explanation of Benefits (EOBs) from your insurance to ensure accuracy. Know whether your debt is with the healthcare provider or a debt collection agency, as this affects negotiation options.

Negotiate and Communicate

Directly contact the billing department of your healthcare provider to discuss potential payment plans, discounts, or eligibility for charity care. If your debt has been sent to collections, try negotiating a lower settlement amount to clear it more efficiently.

Prioritize and Manage Payments Strategically

Make medical debt a priority due to its impact on your credit score. Create a budget to manage your finances effectively, and consider setting up payment plans that fit within your financial capacity.


Navigating medical debt requires informed decision-making and proactive financial management. As a BPO company specializing in medical debts, we understand the challenges and stress that come with facing unpaid medical bills. At First Credit Services, we try to resolve debts in a way that minimizes their impact on your credit report. 

We encourage individuals facing medical debt to communicate openly with their healthcare providers or the collection agency handling their debt. At FCS, we utilize state-of-the-art technology like our proprietary OmniXp platform along with our highly trained medical bill collections staff to find a personalized solution for the patient, and to ensure prompt payment from the patients. 

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