Medical debt grew to $47 billion during the pandemic: Here's how that could affect your credit score

The way credit bureaus treat medical debt "has evolved quite a bit over the last five years."


A side effect of the pandemic: Americans have more medical debt, and more of those balances are making their way into collections. That could have a big impact on your credit score.

According to data from Credit Karma provided to Grow, medical debt among the site's more than 100 million U.S. members spiked by $2.8 billion, or about 6.5%, from the end of May 2020 to the end of March 2021. In all, Americans now owe $47 billion in medical debt.

Many people are struggling to pay. The number of people with past-due medical debt, or debt that is now in collections, grew by nearly 9% over the same period, from 19.6 million to 21.4 million. Collectively, they owe roughly $2 billion in past-due medical debt.

Here's how medical debt can affect your credit score, according to experts, and some steps you can take to limit the damage.

How medical debt can affect your credit score

Having just one collection on your credit report can drop an otherwise good score by 50 to 100 points, according to

That impact will vary depending on the other particulars of your credit and the scoring model a lender uses. For instance, under newer versions of FICO's scoring model, medical debt carries less weight, meaning it will have less of an impact on your score. And some scoring models ignore any collection amounts with an original balance of under $100.

Medical collections are treated differently than other past-due debts

The way credit bureaus treat medical debt "has evolved quite a bit over the last five years," says John Ulzheimer, a credit expert who has worked for FICO and Equifax. 

Until recently, credit bureaus would treat a medical debt in collections just like credit card debt, or a broken apartment lease, Ulzheimer explains. "A doctor's office could send you a bill, wait a couple of weeks, and if you didn't pay them, the heck with you, they'd send it off to a debt collector, and within 36-48 hours, boom, it goes on your credit report," he says. And then that unpaid medical debt could affect your score for seven years.

In 2017, the three nationwide credit bureaus, Equifax, Experian, and TransUnion, instituted new rules about medical debt reported by collection agencies. Under the new rules, if a health-care provider sends your debt to collections, they can't report that debt on your credit report for six months. In addition, credit bureaus are required to remove medical debt collections from your report if the debt is paid.

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To differentiate medical debt from other kinds, third-party debt collectors, otherwise known as collection agencies, have to use separate codes. "Now a medical collection has to be coded in such a way that clearly originates from some sort of medical service provider," he says.

That way it's "very, very easy to tell the difference between a medical collection and any other type of collection," he says.

There's a grace period on medical debt

You have time to fix things before a medical debt starts affecting your credit score. One newer protection is a six-month grace period before a debt sent to collections is recorded on your report. Medical debts "won't show up on the credit score at all until they're 180 days past due," says Ted Rossman, senior industry analyst at Bankrate.

The reasoning behind delayed reporting is that oftentimes, outstanding medical debt should have been paid by an insurance company but was overlooked, Ulzheimer explains. The grace period "buys six months of time to allow the horribly inefficient medical insurance claims process to work its way through, and then therefore, there's no need to ever report it [to a collections agency] in the first place because the doctor ends up being paid by the insurance company."

That minimizes damage for consumers, Ulzheimer says: "It's a whole lot easier to delay the recording of a collection than it is to remove it once it's already been reported."

Medical debt doesn't have to hurt your score for long

It used to be that a medical debt could hurt your score for years. That's because a collections account stays on your credit report for seven years, "even though it showed a zero-dollar balance," Ulzheimer says.

[The grace period] buys six months of time to allow the horribly inefficient medical insurance claims process to work its way through.
John Ulzheimer
Credit expert

Now, once a debt collector gets a payment from either the patient or the insurance company, they have to update their systems within a month to show it was paid. "Once it's updated with that 'paid by insurance' coding," the debt no longer affects your credit score, Ulzheimer says.

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