How many points will your credit score drop due to unpaid medical bills? How long will the entry stay on your consumer report? What can you do to remove the negative data sooner?

You are not alone if you are asking any of these questions.

Becoming sick or having an accident does not mean you are financially irresponsible. It seems unfair that ill health should affect your ability to finance a car or take out a mortgage. Yet it does.

Big changes occurred in the credit reporting industry in 2017 and 2018. Find out what they could mean to you.

How Much Medical Bills Affect Your Credit Score

How much do unpaid medical bills affect your credit score? Most doctors, dentists, and hospitals do not report to the bureaus. Therefore, at this stage, the impact is zero. However, things begin to snowball once the bills go unpaid for a longer period.

Your score could drop by 100 to 200 points if a collection agency becomes involved to report the delinquency, files a lawsuit, or you declare bankruptcy. Request help with these expenses before reaching the point of no return.

Collection Accounts

How many points will your credit score drop from a medical collection account reported by a third-party agency? The answer is different for every person, score version, and the amount of money involved. The average consumer takes a 100 point hit on their rating.

Each credit score company and version handles medical debt differently.

  • FICO ® 8
    • Ignores collection accounts under $100
    • More lenders use this older tested version
  • FICO ® 91
    • Disregards all paid collection accounts
    • Differentiates between unpaid medical and other accounts
    • Few lenders have adopted this newer version (December 2018)
  • Vantage 3.0 and 4.02
    • Ignore paid collections
    • Do not rate medical accounts under 6 months old
    • Used most frequently by education websites

Taking out consolidation loans avoids this trouble but has score impacts of its own.

Judgments

A civil judgment relating to an unpaid medical debt can hurt your credit score by up to 150 points. Once again, the impact will be different for each person. Judgments are public record items, which the rating systems always take very seriously.

A judgment might appear on your consumer report after a collection agency files a lawsuit and wins. The judgment is a separate and additional public record trade line. See below in the next two sections about how long they appear and how to remove them.

Bankruptcy

A bankruptcy prompted by overwhelming medical debt can drop your credit score by up to 220 points. A Harvard study published in 2006 found that illnesses or accidents striking families with private insurance triggered half of all bankruptcies in the United States.3

  • Chapter 13 bankruptcy displays on consumer reports for 7 years
  • Chapter 7 bankruptcy appears on consumer reports for 10 years

How Long Medical Bills Stay on Credit Report

How long to medical bills stay on your credit report? The simple answer is that the collection accounts appear for 7 years. However, the better answer explains how the display time could be much shorter or longer.

Learn what can affect how long the negative data might display. The lessons will set the stage for dispute strategies covered in the next section, and help you avoid elongating the time.

7 Year Rule

Unpaid medical collections stay on your credit report for seven years counting from the date of first delinquency. The 7-year rule applies to all negative information. However, the clock starts ticking much earlier for this type of debt – resulting in less time to hurt your score.

  • Hospitals, doctors, and dentists often delay sending delinquent accounts to the collection agency. Their billing department will contact the patient for payment themselves first.
  • Collection agencies must wait until the medical debt is 180-days past due before reporting the information to the credit bureaus. Sometimes the receivables are much older than 180 days when first referred.

The date of first delinquency occurs 30 days after the hospital, doctor or dentists sends out the first bill. This is when the clock starts ticking. It will take at least another 150 days or longer to appear on your consumer report for the first time. Therefore, the entry will hurt your score for 6.5 years or less.

Statute of Limitations

The statute of limitations has nothing to do with how long medical debt appears on your credit report. The statute of limitations time bars lawsuits by collection agencies and other creditors. They lose the legal right to take you to court and compel payment via a judgment.

However, a judgment could extend the length of time a negative mark appears on your report. Judgments automatically fall off your credit report 7 years after the filing date. The filing date could be years after the date of first delinquency on the account.

Removing Medical Bills From Credit Report

The secret to removing medical bills from credit reports has three parts. First, learn about the governing laws that may apply. Then, get up to speed on industry changes from 2018 and 2018 relating to the issue. Finally, become familiar with the dispute process for erroneous information.

Not Illegal

Medical bills on credit reports are not illegal. Do not count on this legal argument when trying to remove these negative items from your file. In fact, two federal laws explicitly permit the practice.4

Fair Credit Reporting Act

The Fair Credit Reporting Act (FCRA) provides for protection of health information. However, the act does not exclude the reporting of billing and payment information. The FCRA states that a consumer-reporting agency shall not furnish a report containing health-related information unless –

“The information to be furnished pertains solely to transactions, accounts, or balances relating to debts arising from the receipt of medical services, products, or devices.”

Fair Debt Collections Act

The Fair Debt Collections Act (FDCA) prohibits abusive practices by collection agencies. Section 805 paragraph B explicitly allows the communication of medical bill information on credit reports.

“A debt collector may not communicate, in connection with the collection of any debt, with any person other than the consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector.”

HIPAA Violation

Medical bills on credit reports are not a HIPAA violation. Any attempts to remove the entries by citing the Health Insurance Portability and Accountability Act are likely to fall short. The bureaus will ignore or deny your deletion request.

HIPAA violations are dispute and negotiation tactics to use with the collection agency. The privacy rules related to protected health information impose severe penalties. Use these legal requirements to push back when they demand payment.

2017 Changes

New credit reporting laws enacted in 2017 dictate that some medical bills will no longer appear on consumer reports. This change in industry practice resulted from lawsuits filed by multiple state attorneys general.

Beginning in September of 2017 the bureaus will change the way they handle medical debt.5

  • Set a 180-day waiting period to allow insurance companies to process claims
  • Remove previously reported collection accounts paid by insurance

Out-of-pocket expenses frequently remain after insurance pays. Balance billing items such as deductibles, coinsurance, and out-of-network charges make this credit reporting change almost meaningless – unless you pay these costs from the beginning.

2018 Changes

New credit reporting laws enacted in 2018 dictate that civil judgments (many resulting from medical debt) would no longer appear on consumer reports temporarily. The issue driving this change is the unreliable identifying information recorded by the courts.

Under the legal settlement, the three main bureaus agreed to delete these public records from their files beginning April 2018. They will not resume displaying judgments until January 1, 2020, at the earliest.

At this time, the identifying must meet minimum standards in order to avoid mismatching consumer records.6

  • First and last name
  • Full date of birth (day, month, and year)
  • At least 4 digits of the social security number

Filing Disputes

File a dispute using what you just learned to remove medical bills from your credit report. The bureaus must delete any errors or information that does not meet the changed industry standards noted above.

  • Document the date of first delinquency
    • Remove collection accounts still displaying 7 years later
    • Delete entries appearing before the 180-day waiting period
  • Forward insurance explanation of benefit statements
    • Remove accounts paid by insurance
    • Delete entries more quickly
  • Verify the identity information on each trade
    • Dispute that it belongs to you
    • Challenge that it meets minimum standards

Sources:

  1. Fair Isaac Corporation
  2. VantageScore Solutions
  3. Health Affairs
  4. Federal Trade Commission
    1. Debt Collection
    2. Credit Reporting
  5. National Consumer Assistance Plan
  6. TransUnion LLC
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