A Credit Score Is Based in Part On Medical Debt – How It Differs

In the U.S., credit scores play a crucial role in financial opportunities—whether you’re applying for a mortgage, leasing a car, or even securing a job. But what many people don’t realize is that medical debt can significantly impact your credit score, often in ways that differ from other types of debt. With healthcare costs soaring and medical bills becoming a leading cause of financial distress, understanding how medical debt affects credit is more important than ever.

How Credit Scores Work

Before diving into medical debt’s unique role, it’s essential to grasp how credit scores function. The FICO score, the most widely used credit scoring model, considers five key factors:

1. Payment History (35%) – Whether you pay bills on time.
2. Amounts Owed (30%) – Your credit utilization ratio.
3. Length of Credit History (15%) – How long you’ve had credit accounts.
4. Credit Mix (10%) – The variety of credit types (loans, credit cards, etc.).
5. New Credit (10%) – Recent credit inquiries or new accounts.

Medical debt doesn’t neatly fit into these categories, which leads to complications.

The Unique Nature of Medical Debt

Unlike credit card debt or personal loans, medical debt is often unplanned and involuntary. You don’t choose to get sick or injured, yet the bills pile up quickly—especially in a system where a single emergency room visit can cost thousands.

How Medical Debt Enters Your Credit Report

Medical bills typically don’t appear on your credit report immediately. Healthcare providers usually give patients time to resolve billing disputes or set up payment plans. However, if a bill goes unpaid for an extended period (often 180 days), the provider may sell the debt to a collection agency. Once in collections, medical debt can severely damage your credit score.

Key Differences Between Medical and Non-Medical Debt

1. Delayed Reporting – Most medical debts don’t hit your credit report until they’re in collections, whereas credit card late payments are reported after 30 days.
2. Weight in Scoring Models – Recent FICO and VantageScore updates have reduced the impact of paid medical collections, but unpaid medical debt still hurts.
3. Dispute Resolution – Medical billing errors are common, and disputing them can sometimes remove the debt from your report.

Recent Changes in Credit Scoring

Recognizing the unfair burden of medical debt, credit bureaus and scoring agencies have made adjustments:

FICO 9 and VantageScore 4.0 Updates

• Paid medical collections no longer count against your score.
• Unpaid medical collections are weighted less than other types of debt.

The No Surprises Act (2022)

This U.S. law protects patients from unexpected out-of-network medical bills, reducing the likelihood of surprise debt. However, it doesn’t eliminate medical billing issues entirely.

How to Protect Your Credit from Medical Debt

If you’re facing medical bills, here are steps to minimize credit damage:

1. Review Bills for Errors

Medical billing mistakes are rampant. Always request an itemized bill and dispute incorrect charges.

2. Negotiate Payment Plans

Many hospitals offer interest-free payment plans. Avoiding collections should be the priority.

3. Check if You Qualify for Financial Aid

Nonprofit hospitals often have charity care programs that reduce or eliminate bills for low-income patients.

4. Monitor Your Credit Report

Under U.S. law, you’re entitled to a free annual credit report from each bureau (Experian, Equifax, TransUnion). Dispute any inaccuracies promptly.

5. Consider a Medical Credit Card (Cautiously)

Some providers offer specialized medical credit cards with promotional 0% APR periods. However, missed payments can lead to retroactive interest.

The Broader Impact of Medical Debt on Society

Medical debt isn’t just a personal finance issue—it’s a systemic problem.

Rising Healthcare Costs

The U.S. spends more on healthcare per capita than any other developed nation, yet millions remain uninsured or underinsured.

Racial and Economic Disparities

Studies show that Black and Hispanic communities are disproportionately affected by medical debt due to systemic inequalities in healthcare access.

Mental Health Consequences

The stress of medical debt contributes to anxiety, depression, and even avoidance of necessary medical care.

Final Thoughts

While credit scoring models have started to acknowledge the unique nature of medical debt, the system still penalizes those who face unexpected health crises. Advocacy for further reforms—such as removing all medical debt from credit reports—continues to grow. Until then, staying informed and proactive is the best defense.