Why Medical Bills Affect your Credit Score

Medical bills are a part of life. Whether they come in the form of co-pays, deductibles or out of pocket expenses, these bills are inescapable for anyone, regardless of socioeconomic status. Any time a medical bill goes unpaid for an extended duration, you can rest assured that your credit score will suffer as a result.

The Double Edged Sword

When you receive a bill from a doctor’s office and pay it promptly, the repayment report is not reflected on your credit report. In this case, paying medical bills in a timely manner doesn’t help you credit wise; however, outstanding medical bills in collection have a negative impact on your credit history, following you for up to seven years or until paid in full –whichever comes first.

The Impact

Collection accounts lower your score and affect your ability to open new lines of credit or receive credit limit increases on established debt, in many cases. Medical collections will also hinder your ability to make larger purchases like cars or homes.

The Gray Area

While derogatory medical accounts affect your credit report, there remains a gray area. In contrast to other delinquent debt, creditors do not consider medical collections as adversely as other unpaid financial obligations. In essence, unpaid medical bills will ultimately damage your credit in the short and long term, but not as badly as an unpaid Visa, MasterCard or a personal loan.

The Reasoning

Unlike debt that you take when purchasing new television set or debt incurred to make routine purchases, medical bills can mount up due to unforeseen circumstances. Thusly, creditors are more understanding and lenient to consumers that have only medical collections on their credit history. They may extend credit to consumers with unpaid medical bills, but will probably do so with more unfavorable terms than a consumer without these adverse marks. However, consumers sporting poor medical repayment history in conjunction with a slew of other poorly paid obligations earn a credit death sentence until it is cleaned up.


As cliché as it sounds, an ounce of prevention is worth a pound of cure. The best antidote to avoid medical collection is financial preparedness. There are a majority of ways in which a consumer can become better prepared for medical catastrophes, such as having a medical emergency fund in a saving or money market account, maintaining an employer sponsored or individual health savings account –with tax deferment—or even liquidating a 401(k) or retirement fund in the event of adverse health. Speak to a financial planner regarding the best solution for your financial planning design so that mounting medical bills don’t catch you off guard and contribute to adverse credit.