How Much Do Past Medical Bills Affect Credit Score?

Medical debt is a growing problem in America. A 2009 CNN Health report notes that, from 2001 to 2007, the number of individuals filing bankruptcy due to medical debt rose from 46 percent to 62 percent. If you have outstanding medical debt, the accounts can appear on your credit report and tarnish your good credit for many years to come.

Credit Reporting

Common consumer debts such as credit card accounts, mortgages and auto loans can all have either a negative or positive effect on your credit score depending on whether or not you pay the debt on time. Medical bills, however, do not positively affect your credit. If a medical bill appears on your credit report, its impact is derogatory.

Because health care providers are not in the business of lending to consumers, they have no reason to maintain reporting contracts with the credit bureaus. Medical debts only appear on your credit report once they become collection accounts. Collection accounts are always negative and lower your credit scores.

Negative Impact

Estimating how much an unpaid medical bill will adversely affect your credit score is impossible due to the fact that credit scoring formulas are kept secret by the companies that own them. In addition, the degree to which any given item affects your credit as a whole depends on the other entries within your credit record. For example, if two individuals both receive a medical collection for $500 from the same collection agency, one consumer's credit may suffer by only 50 points while the other individual could lose over 100 points.

The Exception

Unpaid medical debts cause your credit score to decrease not because the debts are medical in nature but because they are collection accounts. An exception to this rule exists for small debts.

If the unpaid medical bill that appears on your credit file reflects a debt less than $100, your credit score will remain unaffected. This is because the FICO '08 scoring model---current as of April 2011---ignores any collection account for less than $100 when tabulating scores. While your credit score remain the same, the collection will still appear on your credit report and is still visible to lenders.

Time Frame

When the credit bureaus remove medical collections from your file, those accounts no longer have any effect on your credit rating. The Fair Credit Reporting Act requires that each of the three major credit bureaus delete collection accounts after seven years. If the collection account appears on your credit report for longer than seven years, you have the right to dispute the notation as obsolete with each credit bureau in order to have it removed from your record.