How long do unpaid medical bills stay on your credit report?

How does medical debt settlement work?

It works the same way as any other type of debt settlement: you make an agreement with the creditor (or in this case, the collector) to pay less than what you owe. This comes with its own upsides and downsides.

Pros and cons of medical debt settlement

Pros of Settlement Cons of Settlement
You’ll get rid of your medical debt fast without having to file for Chapter 7 bankruptcy. Your settled medical debt becomes a negative item on your credit report. It stays there for seven years.
On average, you will pay only 48% of what you owe. Credit score damage is basically inevitable.
It’s not as complicated and expensive as bankruptcy. You could get scammed. The medical debt settlement industry has its fair share of scammers.

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Different Rules for Each Contract Type

The statute of limitations on your debt is defined largely by the type of contract governing the debt. Oral contracts have a different statute than written contracts, promissory notes, and open-ended contracts. What does that mean?

  • Oral contracts are verbal agreements you make to repay money. An example of this would be a friend agreeing to lend you money, but not putting anything in writing.
  • Written contracts are documents you sign that include terms and conditions. Most loans like car loans, personal loans, and mortgages fall into this category. So does medical debt – you will almost always be asked to sign paperwork agreeing to repay any expenses accrued (and not covered by insurance) prior to receiving medical care.
  • Promissory notes are a lighter written contract, an agreement between two people with the repayment terms and interest spelled out.
  • Open-ended contracts have a revolving balance that you can repay and borrow again, like credit cards.

Again, each state has their own statute of limitations for each kind of debt. You can find the limitations for your state here.

Should you pay off medical debt after its reported to your credit?

You may think the damage is done after Step 3, but it’s still worthwhile to make payments if you can, for a few reasons:

  • After July 2022, medical bills sent to collections will drop off your credit report once they’re paid in full.
  • Several newer credit scoring models — including the unique FICO® score model — ignore paid collection accounts, so your score may improve.
  • A paid account looks better than an unpaid account when lenders review your credit history.

Do unpaid medical bills ever go away?

After enough time has passed unpaid medical debts may become uncollectible under your state's statute of limitations for debt. This means you can no longer be sued for those medical bills. That does not, however, erase the debt or the associated credit reporting.

The 6-month buffer for new medical debt

In September 2017, the three major credit bureaus — Equifax, Experian, and TransUnion — implemented a new rule to give patients a 180-day grace period to resolve their medical debt before it shows up on their credit reports.

Per Experian:

The six-month wait is designed to help people with a common dilemma — the need for time to make necessary payments or finalize issues with insurers. Once a medical debt gets paid, check that the listed account is removed from your credit report. If an account is 180 days old and unpaid, it will be added to a consumer’s credit file.

If you have health insurance, you’re probably paying more than enough in premiums. Your credit score shouldn’t take a hit for medical procedures that are covered anyway. 

How do medical collections affect credit scores?

Multiple factors are commonly used in calculating credit scores, including credit card utilization, payment history and age of credit history.

Your payment history is the most important factor that goes into determining your credit scores. So just like any other collection account that shows up on your credit reports, medical collection accounts can have a negative impact on your credit scores if they go unaddressed.

But it’s possible for a medical collection to affect your credit scores differently than other types of collections. Some scoring models give less weight to outstanding medical debts than other types of collection accounts. And some (but not all) credit-scoring models will disregard unpaid medical bills if you originally owed less than $100.

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Get Outside Help

Few healthcare consumers are experts in medical billing. A savvy choice is to enlist the help of someone who is: a medical caseworker, debt negotiator, or medical billing advocate. These professionals might be able to reduce what you owe when you can’t or are too timid to try.

Medical billing advocates are insurance agents, nurses, lawyers, and healthcare administrators who can help decipher and lower your bills. They’ll look for errors, negotiate bills, and appeal excessive charges. Expect to pay an advocate around 30% of the amount by which your bill is reduced.

You can also ask to speak with a caseworker from your hospital or insurance company if you need help understanding your bills and resolving payment issues, says Fox. A caseworker may be able to refer you to charities, churches, community organizations, and government agencies that can offer financial assistance.

Can healthcare providers sue you for nonpayment?

Maybe you’ve heard horror stories of hospitals taking patients to court for nonpayment. This does happen, and it’s distressingly common, especially at larger U.S. healthcare facilities.

If the healthcare provider does sue you, though, you still have options. They can’t successfully press charges if the debt has passed your state’s statute of limitations — a time limit cutoff for which someone can sue about a certain contract.

For instance, in New York state, the statute of limitations for medical debt is three years. This means if your debt is more than three years old, you can’t be sued to recover it. Each state has a different statute of limitations — you can look at your state’s law up here — and they typically range from three to 10 years.

Collection Agencies Under the Law

Once the medical provider has sold your debt to a collection agency, the collection agency must wait 6 months, or 180 days before reporting medical debt to your credit report. This provides you time to pay off your debt before it goes onto your credit report.

Medical Providers Negotiate with Credit Collection Agencies

Selling your bill involves receiving less than the full amount of payment. The collection agency only pays a partial amount of the full bill to your medical provider. Your medical provider does not want to share the profit that they could make if you paid your bill.

According to Medical Billing and Coding guidelines, If the patient is delinquent in their payment, or if they do not pay the full amount, it is the responsibility of the billing department to ensure that the provider is properly reimbursed for their services. This may involve contacting the patient directly, sending follow-up bills, or, in worst-case scenarios, enlisting a collection agency.

If they decide to sell your bill to a collection agency, your medical provider will not contact you again about the payment.

What to expect after settling your medical debt

After you settle, expect a lower monthly payment. After all, you agreed to pay less than what you owe. If you’re working with a debt settlement company, you may have to pay fees as well.

Will settling a medical debt hurt my credit?

When you first get your medical bill, it’s not a debt that will show up on your credit report. It’s just a bill. However, when you fail to pay it on time, your medical provider could send that account to collections as a debt. This collection account will show up on your credit report, not the medical bill. Nothing about your personal health records will be on your report.

If you’re having trouble paying off this debt, you may choose to enter into a debt settlement program. There are some DIY settlement methods, but they can be risky, so we recommend finding a reputable settlement company.

In general, debt settlement may hurt your credit score and appear on your credit report. When the account is paid off, it will stay on your credit report for seven years, though there are ways to get around this. When it comes to medical bills, an account will show up on your credit report if you miss your due date and the medical debt is sent to collections. Even then, it will only show up after it has been in collections for 180 days. This gives you plenty of time to deal with the debt collections agency and prevent it from ever becoming a negative item on your credit report. If your collections account is paid by your insurance company, it’s removed from your credit report right away. This is because of the National Consumer Assistance Plan enacted by all three credit bureaus in 2015.

If the damage has already been done and you need help fixing your credit, we recommend that you go through a credit repair service.

How will settled medical debt show up on my credit report?

These accounts will show up as “settled” accounts. However, there are a couple ways you can negotiate to lessen the credit damage a “settled” item can cause.

First, you can negotiate for the account to be listed as “paid in full.” This looks much better than “settled,” which reveals you paid less than what you owed.

Second, you can negotiate to re-age your account. Re-aging removes old delinquent payments from your credit report.

Can I use “pay for delete” to get medical debt off my credit report?

“Pay for delete” is a method by which consumers can pay to have a settled account removed from their credit report. It’s not very reliable and can be hard to accomplish, especially if you settled on your own. Seven years seems like a long time for an account to stay on a credit report. But with every year that passes, the negative impact of the account lessens.

It may also be unnecessary. If your insurance company paid off your collections account, reporting agencies will remove it from your credit report immediately without you requesting it. This is because of changes made by the National Consumer Assistance Plan mentioned above.

DoNotPay Can Help Clean Up Your Credit Report

Do you have an unfairly-reported medical charge on your credit report? Do you need to take care of other potential problems with your credit report?

If you want to clean up your credit report but don’t know where to start, DoNotPay has you covered in 3 easy steps:

  1. Search Clean Credit Report on DoNotPay. 

     

  2. Prepare a recent copy of your credit report that you can use as reference. 

     

  3. Let us guide you through the 4 potential options:
  1. If you’ve already paid off your debt, we’ll help you file a Goodwill Removal Request to get it removed. 

     

  2. If you notice any errors in your report (we have a list of common errors you can use!), we’ll help you file a credit dispute to the creditor or major credit bureaus. 

     

  3. If there are no errors, we’ll check if you’re still eligible to file a debt validation request. If they can’t validate your debt, they’re required to remove it from your report and they can’t collect it! 

     

  4. Lastly, if none of the above options work, we’ll help you file a pay-to-delete negotiation letter. You can customize the amount you are willing to pay in exchange for getting the item removed. 

     

You can also check out our other credit products, including Credit Limit Increase, Get My Credit Report, Keep Unused Cards Active, and more.

How to Keep Medical Bills off Your Credit Report

The good news is that in most situations, a little vigilance, knowledge and organization are all it takes to keep your medical bills from going to collections. Take these steps when you’re planning any doctor visit or medical procedure:

  1. Know what to expect. Get familiar with your health insurance plan so you know exactly what it covers, what it doesn’t and what your copay will be for a visit or procedure. Armed with this information, you’re less likely to make costly mistakes such as visiting an out-of-network doctor or not asking for a generic version of a prescription drug.
  2. If you don’t have health insurance or your insurance doesn’t cover the visit or procedure, find out ahead of time how much you can expect to be charged. (You probably won’t get an exact figure, but you can get a range or estimate.) This is also a good time to find out if the health care provider offers any payment plans or accepts medical credit cards, such as CareCredit.

  3. Keep track of your medical bills. Make it a habit to read any letters, emails or other communications from your health care provider as soon as you receive them. That way, you’ll catch mistakes quickly and can contact the provider to iron out any problems right away.
  4. If you recently had a procedure or visited a doctor and haven’t received a bill, contact the health care provider to make sure they have your correct address and that you didn’t miss a bill. Do you receive bills by email? Make sure to add your providers to your email address book so their messages don’t get lost in your junk or spam folders.

  5. Make sure the charges are accurate. Medical offices and insurers make mistakes. Simple human errors such as miscoding a medical procedure can result in incorrect charges. Review each medical bill carefully and compare it against your insurance company’s benefits to see if you’re being charged the correct amount. If not, contact the health care provider’s billing office, your health insurance company or both to let them know. After a hospital stay or complex procedure, ask for an itemized bill so you can check specific charges for accuracy.

What if you’ve done all of the above and still end up with a medical bill you can’t pay? Don’t panic: There are a few options that can help you keep the bill from going to collections.

  • Try to negotiate your medical bills. The best time to negotiate medical costs is before your treatment or procedure, but you can also try to do so afterwards. Some health care providers charge lower rates for patients who don’t have health insurance and are paying out of pocket (known as “private pay”). Websites such as Healthcare Bluebook and FairHealth let you research the average cost of specific procedures in your area. You can use the information to choose care providers and as leverage to negotiate lower prices.
  • Work out a repayment plan. What if your health care bill is as low as it’s going to get, but it’s still more than you can pay? See if you can set up a monthly payment plan with the provider. Many providers would rather work with you than send the bill to collections. Contacting your health care provider’s billing office immediately to discuss repayment will show you’re acting in good faith (and will give you more time to pay the bill).
  • Keep an eye on your credit report. Are collection agencies calling about a medical debt you’ve never heard of before? Legitimate medical debts sometimes go to collections without you ever receiving a bill. This might happen if your provider has an incorrect address for you or if your mail is misdelivered. If you have a common name, it’s possible you’re being charged with someone else’s bill. Finally, some collection calls regarding medical debt are scams. Before you panic (or pay anything), ask the collection agency to provide proof of the debt in writing. Under the Fair Debt Collection Practices Act, they must give you this information within five days.

The best way to avoid getting blindsided by a collection agency? Get a free credit report on a regular basis and review it carefully. If you find errors or any suspicious activity in your credit history, contact the credit reporting agency right away to set the record straight.

The bottom line

The new ways of assessing medical debt should lift tens of millions of Americans’ credit scores. It’s always a good idea to check your credit reports regularly to make sure everything is accurate. Especially if you have one of the types of medical debt that should disappear on July 1, make a note to check your credit reports on or shortly after that date.

A good, free resource is AnnualCreditReport.com. It’s providing free weekly reports from all three major bureaus through the end of the year. If anything looks incorrect, file a dispute with each bureau that’s reporting the errant information. Your credit score is one of the most important numbers in your financial life, so it’s important to protect it.

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