While your medical history is certainly not a part of your credit report, unpaid medical debts that go to collections can go onto your report and affect your credit score. Collections marks on your credit report can take a chunk off your credit score and last up to 7 years.
However, there is good news – credit agencies now weight medical debt less than previously, new laws require collections agencies to wait at least 180 days before reporting medical debt, and there are multiple things you can do to fix any collections marks on your credit.
What Happens When You Can’t Pay a Medical Bill?
Unlike lenders and creditors, medical providers generally don’t report information to the three Credit Reporting Bureaus (CRAs) –– Experian, Equifax, or TransUnion. That means a few missed or late payments may not impact your credit initially –– often until (or unless) the debt you owe is sold to a debt collector and they choose to pursue payment. At that point, you may begin to see an impact on your credit.
How soon a medical provider may sell your debt to a collector can vary. Some may turn the debt over after the bill is 60 days late, others may wait as long as 180 days, and some may never sell the debt.
What Happens When You Default on a Debt?
When you fail to pay a credit card bill, medical debt, student loan, mortgage, car loan, or other debt for more than a few months in a row, you risk defaulting on that debt. When you default on a debt, it doesn’t go away. The consequences of default include negative reporting on your credit report and a possible dip in your credit score. The debt will likely be sent to a debt collector or collection agency.
Depending on which type of debt you’re defaulting on, you could have your property repossessed; which is what is likely to happen if you default on a car loan or other secured debt. Additionally, legal action could be filed against you if a creditor chooses to hold you legally responsible for the unpaid balance on your account.
Negotiate a settlement
If you are disputing an insurer’s denial, contact the healthcare provider to ask for more time before it sends your unpaid bill to a debt collector. Providers may offer installment payment options with little or no interest, or they may accept a lesser amount rather than go through a lengthy dispute or have you file for bankruptcy.
The Seven-Year Itch
There is a harmful urban legend of the “seven-year rule,” a period of time after which some people believe their debt is magically erased. Some myths do have a bit of truth in them. The seven-year rule only applies to the length of time a debt stays on your credit report. After this time, the item(s) cannot negatively impact your credit score. But almost every rule has an exception.
Chapter 7 bankruptcy filings remain on your credit report for ten years! Judgments often remain for 7 years or for the length of your state’s statute of limitations, whichever is longer. Fortunately, medical bills are no longer reported on your credit report after 7 years and can no longer harm your credit after this time. They can no longer make it hard to apartment shop or get approved for a loan. However, you are still responsible for the debt. It’s not all bad news, though.