How Much Do Unpaid Medical Bills Affect Your Credit Score

Your credit score is an important number that affects your ability to qualify for credit and the terms you are offered if approved. Most American consumers are familiar with basic credit scoring principals. For example, paying bills late will be viewed as a negative while reducing debt is considered a favorable action. There are many other variables that are considered when calculating a credit score. It is important to understand how different situations affect your score in order to make the best decisions to improve your score. Here we are going to look specifically at unpaid medical bills and the impact they have on your credit score.

The reason that I was curious about this, was based on a recent panel that I sat on. On the panel consisted of 3 lenders – one from a local bank, one from a credit union, and one that specialized in SBA loans. You might be asking yourself why in the heck I was sitting in on the panel? Trust me, I was asking myself that very question.

Part of the discussion had turned to credit scores and the lender from the local bank made a comment something to the affect of, “When it comes to unpaid medical bills, they have the harshest direct effect on your credit score. A $50 unpaid medical bill can sometimes reduce your score by 100 points”.

When I first that comment, I was a little taken a back. Do unpaid medical bills really hurt your credit score that bad?

Treated like any other debt?

There are several different perspectives from which debt is viewed in relation to your credit score. For example, simply having debt may not viewed as negatively if you are making timely payments each month. On the other hand, unpaid debts- such as the case with unpaid medical bills will have a more significant impact on your credit score when such debts are reported to the credit bureaus as a collection account. When you look at the big picture, having a high credit utilization is considered a negative, however when compared to debts that have not been paid and end up in collection- high credit utilization is the lesser of two evils.

The big takeaway is this: Medical bills are not reported to credit agencies. It’s when you don’t pay the medical bill and it gets turned over to a collection agency that it can have a damaging affect on your FICO score.

Flexibility in payment

Unpaid medical bills do offer a level of flexibility that is not often seen with credit card accounts or other financial obligations. In many cases, hospitals and other health providers will be willing to work out a payment arrangement which will prevent the unpaid bill from being reported as late or delinquent. This can be a real advantage for individuals who do not have the ability to pay the bill in full, yet are able to pay down the debt over time. If the medical bill is not reported as unpaid or in collection, there may be no impact on your credit score. It is for this reason that any individual who has an outstanding medical bill should contact the respective health care provider to discuss available payment options. By doing this you can prevent a negative hit to your credit score while you pay off your unpaid bill.

Liz Weston, author and financial expert was asked by someone what they can do to help out with their credit score. This person had numerous delinquencies on their credit report from unpaid medical bills and was trying to raise their current score of 650.


You can help prevent future damage to your scores by monitoring all your doctor bills closely. Your goal is to prevent them from being turned over to collections or being reported to the credit bureaus at all. That may mean calling the doctor and your insurance company monthly to check on the progress of any reviews that are delaying payment; in some cases, you may need to pay the bills and seek reimbursement from your insurer. Yes, it’s a hassle, but it’s better than another blow to your scores.

Liz is right, it is a hassle, but is totally worth it. My wife is the queen of being organized and she is constantly on top of our medical bills. There have been countless times where she’s had to challenge the insurance company on what we paid when they threatened to turn it over to a collection agency. She’s on top of it and with a credit score in the 790′s, it’s proof that staying on top of your medical bills pays off.

Factors to consider regarding unpaid medical bills and your credit score

Determining how an unpaid medical bill will impact your credit score is not a perfect science. Each individual has their own credit history which will be factored into the formula for determining your score. If you have a history of paying your bills on time and managing your credit responsibly, the impact to your score may not be as damaging. Conversely, if you have history of making late payments, delinquent accounts or collection activity, an unpaid medical bill may have a significant impact on your credit score. Once an unpaid medical bill is reported to the credit bureaus, it will remain on your credit report for up to seven years. By understanding how different debts impact your credit score, you can make informed decisions regarding your personal finances and how you manage credit and debts moving forward.

Creative Commons License photo credit: Henderson Images

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Comments | 1 Response

  1. Jessica Crumley says

    I had an unpaid medical bill that went to a collection agency. I used a medical bill negotiation service http://www.klfinancialservices.com, not only did they negotiate a payoff, we were also able to have the collection agency show the bill paid as full, and it did, for a fact, raise my score almost 30 points, not a ton, but it helped.

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