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5 Ways to Keep Medical Debt From Killing Your Credit

Know your rights, dispute errors and keep good records

spinner image A closeup of a credit card and a stack of medical bills.
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If there is anyone on planet Earth who should be able to handle medical billing issues, it is Miranda Yaver.

The visiting assistant professor at Ohio’s Oberlin College has a Ph.D., spent two years doing postdoctoral work at UCLA’s Fielding School of Public Health, and is even writing a book about medical claim denials.

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But even with such a tailor-made résumé, she discovered that over $11,000 in wrongly denied claims had found their way onto her credit report. The hospital had sent it to collections while the issue was still being appealed.

“This is my area of expertise, and even I am getting the runaround,” Yaver marvels. “How can a single mother working a couple of jobs possibly handle this stuff? The answer is they probably can’t.”

Yaver is hardly alone. According to a new report from the Consumer Financial Protection Bureau (CFPB), there is roughly $88 billion in medical debt appearing on 43 million credit reports. In fact, as of 2021’s second quarter, a whopping 58 percent of the debts that are in collections and haunting people’s credit reports are medical bills.

“It’s a huge problem, especially with the pandemic,” says Beverly Harzog, a credit expert for U.S. News & World Report and author of The Debt Escape Plan. “So many people have had hospital bills the last couple of years that they have had trouble paying off,” she adds. “A lot of times it ends up on your credit report — and once it’s there, it’s hard to get off.”

Race and medical debt

  • 27.9 percent of Black households carry medical debt, compared to 17.2 percent of white households and 9.7 percent of Asian households
  • 1 in 3 Black adults have past-due medical bills, compared to fewer than 1 in 4 white adults
  • 17 percent of Black adults lack health insurance compared to 12 percent of white adults

Source: National Consumer Law Center

The scope of the problem has become so bad that the major credit agencies swung into action shortly after the CFPB report was released. Experian, Equifax and TransUnion announced a handful of new measures: Starting July 1 of this year, for instance, paid-off medical collection debt will no longer appear on consumer credit reports.

In addition, the time period before unpaid medical debts can be reported will increase from six months to one year. And starting in the first half of 2023, amounts below $500 won’t appear on credit reports at all. Combined, these measures are projected to reduce medical debt on credit reports by nearly 70 percent.

It’s cold comfort, though, for the millions of Americans who have already been dealing with this issue. Here’s why it is so problematic: Negative notices on your credit report drive down your credit score, which is what lenders look at when they evaluate you for loans.

“Negative credit can affect almost everything,” says author and credit expert Gerri Detweiler. “Mortgages, auto loans and credit cards become more expensive. It can mean bigger deposits if you are opening utility accounts. It can make it more difficult to rent an apartment. It can even make it more difficult to get a job.”

If you have a very good score — of 740 or higher, for example — you will typically qualify for the most attractive rates when taking out a loan for big purchases like a home or a car. But the lower your score, the higher the rates lenders will charge you. Over the course of a home loan, even a small differential could cost tens of thousands of dollars.

What do you owe? Confusion reigns

With medical issues in particular, debts aren’t as clear and obvious as they would be for something like a monthly phone bill with a due date. As anyone who has ever dealt with the health care system knows, billing is a complicated dance involving the provider, the insurer and the consumer.

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Often the person receiving the treatment doesn’t know precisely who they owe or by when or how much. These kinds of interactions and negotiations can take months to work their way through the system, so people may not even realize that any coverage decision has been reached.

Then there are additional wrinkles: Sometimes claims are denied improperly, as with Miranda Yaver. That requires an appeal, which is another lengthy process. Other times information is just flat-out inaccurate. Or you might not get properly notified if, say, a letter gets misdelivered or an email ends up in your spam folder.

See how easy it is for medical bills to end up on credit reports?

“Medical debt can happen to anyone, and even those who always pay their bills on time can find themselves with bad credit,” says Detweiler. “For some reason, consumers seem to think that medical debt doesn’t impact their credit. And while there are some additional protections — like not getting reported to credit agencies until it is 180 days past due — if it does get on your credit report, it is going to be very negative. It’s definitely something you want to address.”

Dealing with medical debt

Knowing this, there are some steps you can take to prevent this from happening, or to deal with it once it does. But it does require some legwork. Some tips from the experts:

1. Take preemptive action

Your first line of defense is to make sure medical bills don’t land on your credit report in the first place. So while it might be human nature to sit and wait while medical bills are crawling their way through the system, the better strategy is to communicate, communicate, communicate.

That means contacting your doctor and insurer proactively to see where a bill is in the process, whether any decisions have been reached, and what the patient responsibility is and when it is due. If a bill is legitimate and you can get the right amount to the right people by the due date, great. If something is erroneous and needs to be corrected, you can start the clock on that process as soon as possible.

By the way, if you work for a medium-size or large employer, odds are the company has specialized “health care advocates” to help steer you through the health care maze, so make sure to take advantage of their expertise.

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2. Get creative with payment plans

The harsh reality may be that you are simply not financially able to cope with a big medical bill right now. But don’t just throw your hands up and do nothing.

A first step is to negotiate with the provider, since many of them are surprisingly receptive to giving discounted rates if it means they get some of their money instead of pennies on the dollar. Another option is to work out an installment plan of smaller payments over long periods. If you arrange such a plan and make those payments regularly, nothing will get reported to the credit agencies.

3. Dispute errors

Inaccurate information on your credit report is far more common than you might realize. To head that off at the pass, make sure to review your credit report. Federal law lets you see your reports from each of the three major credit agencies for free once a year, at You may also be able to get access and updates other ways, such as through your bank.

If you notice any discrepancies in your credit reports, there are mechanisms in place to dispute them with the individual agencies. You may also have to get in contact with whoever reported the inaccurate information, like the doctor’s office or collection agency.

4. Know your rights

Debt collection agencies are notoriously aggressive, but there are laws about what they can and can’t do. Don’t be bullied or intimidated into paying what you feel is an incorrect or inflated amount. The Federal Trade Commission has assembled some consumer tips about dealing with debt collectors. And the recently passed No Surprises Act builds in new protections for consumers for issues like emergency and non-emergency out-of-network services that turn out to cost way beyond what was expected or agreed to.

5. Keep records

Since the entire health care billing system is so opaque, your best defense is to be meticulous in creating a paper trail. When Beverly Harzog has a medical billing issue, for instance, she keeps copies of the original bill; writes down any phone interactions with providers and insurers, such as whom she talked to and at what time; and files away any updates on coverage decisions and appeals. That way she is always armed for battle.

“You don’t want to wait until you get that notice that your payment is past due,” she says. “As soon as you see something, jump on it right away before it starts snowballing out of control.”

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