Updated: Apr 27, 2023

Can Unpaid Medical Bills Hurt Your Credit Score?

Unpaid medical bills could hurt your credit report even if the amount owed doesn't seem justified. Here's how to avoid this increasing threat to your FICO score.
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Although a patient should focus on recovering after a medical procedure, ignoring the bills that it generates could hit your credit score hard, even if the bills don't seem justified.

According to Richard Cordray, director of the U.S. Consumer Financial Protection Bureau, half of all unpaid bills referred to collection agencies are for medical procedures, with 20 percent of all Americans seeing their credit adversely affected.

From all reports, the problem is worsening. Many doctors used to be in private practice where patients could work out a bill over time if it got too onerous to pay at once.

During the Great Depression, tales abounded of doctors accepting a couple of chickens in lieu of cash for a procedure – not so today.

Doctors are increasingly working as members of medical groups where billing is based on a strict recording of ICD-9-CM Diagnosis and Procedure Codes that are handled by computers automatically.

It’s not uncommon for clerical errors to make their way through the system and be mistakenly attributed to your account. If you see a charge and don’t understand it, don’t tear up the bill; follow up immediately to see why it is there.

Even if you are insured, not all unpaid medical bills are covered

Many policies, especially the bronze plans under Obamacare, have large deductibles. Those have to be fully paid before any coverage kicks in

Under some insurance plans, like many health maintenance organizations (HMO), you’ll never see a bill, as long as you get your care in network.

Others, as in a preferred provider organization (PPO) will send the bills to you along with the insurance company for reimbursement.

A simple annual blood test for cholesterol, glucose, triglycerides and sexually transmitted diseases can run over a thousand dollars.

Do you pay it, or wait for a second notice from the lab? Unless you’re absolutely certain that the unpaid medical bill will be handled, it’s good to double-check its status with your insurance company.

Let’s say that you’ve finally agreed to get a colonoscopy, a procedure you’ve been understandably putting off until you find a specialist who agrees to put you fully under so that you don’t remember a thing while a camera snakes through your innards.

Then you get the bill and learn that the anesthesiologist was not covered by your policy.

Unfortunately, you are responsible for that expense. It’s always a good idea to know exactly what will be covered before you submit to any procedure.

One issue is that there is no consistency when it comes to medical bill collections. One office might hold off for several months before selling its bills to a collection agency.

Another cash-strapped doctor might wait just 60 days. Remember, that when it comes to bills, you want to avoid collections at practically any cost.

Even if you’ve paid your credit cards faithfully on time and your car loan without a delay, a single collections account –whether for medical issues or otherwise – can lower your FICO score by 100 points, causing you to pay a significantly higher interest rate on a mortgage or other loan.

What to do about your unpaid medical bills

When you do get a medical procedure or visit a doctor's office, be fully informed about what bills are supposed to be paid and when they should be paid.

Don’t ignore any medical bill, no matter how small.

If you’re fighting for insurance reimbursement, remember that the claims appeals process has been streamlined under Obamacare.

If you do get hit by a large bill, ask to see an itemized list of expenses. Put them on a spread sheet and take a good look.

You could easily find expenses that seem to be exorbitant. One patient discovered an $85 charge for tweezers and $20 for a box of tissues.

If you’re discharged from a hospital first thing in the morning, why should you have to pay for an entire day?

When you've analyzed your data, it's time to negotiate, but if time drags on, don’t wait to pay the bill. You can always apply for reimbursement.

Finally, if it gets too much for you, remember that patient advocacy groups do exist. Finding a knowledgeable professional to help can potentially save you thousands and preserve your good credit.