Medical bills can be overwhelming, and they often lead to significant debt. For many people, this debt can impact their financial health for years to come.
Understanding how medical debt affects credit scores is key to managing these challenges.
Immediate impact on credit scores
When medical debt goes unpaid, it can have a direct impact on credit scores. Medical providers may transfer unpaid bills to collection agencies after a certain period, often 90 to 180 days. Once an account goes to collections, it shows up on the individual’s credit report, potentially lowering their credit score significantly. This drop in credit can make it difficult to secure loans, housing, or other forms of credit.
Long-term consequences of medical debt
The impact of medical debt doesn’t disappear quickly. A collection account can remain on a credit report for up to seven years, even if the debt is eventually paid off. This can result in a long-term decrease in creditworthiness. Although the severity of the impact may lessen over time, the collection mark still affects access to credit, especially for large purchases like mortgages or auto loans.
Recent protections for medical debt
Recent changes to federal credit reporting policies offer some relief. As of 2023, paid medical collections are now removed from credit reports, and unpaid medical debts under $500 will not be reported. Many medical debts are under this threshold. However, large unpaid medical debts that go to collections can still damage credit for years.
Seeking help for medical debt
One option is filing for bankruptcy, which can help people make a new start. State and federal programs may also offer some relief, and understanding these options can help reduce the financial burden.
Moving forward with financial health
Medical debt can feel like an enormous burden, but understanding its impact and finding ways to manage it can help you regain control over your financial health. Taking proactive steps and seeking available protections can make a big difference in the long run.