A common question many people have is is, “do medical bills affect credit score?” In short, the answer is yes, but when applying for credit for a mortgage, vehicle loan or consolidation loan, your banking institution may take the type of debt into account when making a recommendation on whether or not to approve your loan.
Medical bills affect credit score
There are two ways in which medical debt will show up on your credit report: 1) you obtained a line of credit to pay a medical bill, or 2) you failed to pay your medical bills and they were turned over to collections. Read: How to Deal with Medical Bills Collections
Medical Bill Credit Card
While there are companies that specialize in lines of credit for medical bills, most often only you will know if you have used a credit card or loan to pay a medical debt. You may want to keep a record or evidence of this should you need to use it as justification with an underwriter. It is true that creditors tend to view debts resulting from medical care more favorably than overspending during the holiday season. However, regardless of the type of debt, a line of credit is treated the same with your credit score because a balance appears on your credit report, and if it is not paid off immediately, is carried over month-to-month. It can throw your debt ratio off as if you had charged up your credit card.
Medical Bill Collections and Your Credit Score
The most common way a medical bill shows up on your credit report is if it goes unpaid and is turned into a collection agency. This is usually a formal collection agency or an attorney’s office who processes collections on behalf of a medical provider. Medical bills with the most recent version of the FICO credit score have less impact than others, but a collection still affects your credit report. In fact, one collections account can affect your score by up to 50 points! That’s why it is import to address and resolve your medical debts. See: How to Negotiate a Hospital Bill
Medical bills do affect your credit score so you should address them and resolve any issues as soon as possible.