While medical balances themselves don’t show up on your credit report the same way credit card or car loan accounts do, unpaid medical bills can hurt your credit score. If you don’t pay medical bills or make arrangements for payment within a certain amount of time after receiving treatment, your provider might send the accounts to collections. Once that happens, the collection activity shows up on your credit report.
According to Bankrate, medical debt is responsible for almost half of the collection accounts reported on American credit reports. In fact, the Federal Reserve notes that as many as one in six reports contain a note about medical debt collections.
A collection account listed on your credit report can cause a FICO score drop by up to 100 ponits, which is a major hit to credit worthiness for most individuals. This is even more unsettling given the fact that most people who experience medical debt are usually dealing with more than one account. For example, if you have surgery in a hospital, you might be facing bills from the surgeon, the hospital and the anesthesiologist. All of those accounts could be sent to separate collection agencies and reported separately on your credit score.
To make matters worse, medical debt cannot be discharged in bankruptcy. However, bankruptcy can be used to stop aggressive collection measures and to restructure other debts so you can begin to pay off medical debt.
To avoid dealing with serious issues on your credit report, consider addressing medical debt before it goes to collections. Work with providers and billing companies to make payments or seek experienced advice about legal options for debt relief.
Source: Bankrate, “How will unpaid medical bills hurt credit?,” Janna Herron, accessed Oct. 23, 2015