The Impact of Medical Debt on Your FICO Score

4 May 2025

Medical bills can hit like a freight train—unexpected, overwhelming, and often impossible to avoid. Whether it's an emergency surgery, a hospital stay, or ongoing treatment, medical expenses can pile up fast. And if you're struggling to pay them off, you might be wondering: How does medical debt affect my FICO score?

You're not alone in this. Millions of Americans carry medical debt, and its impact on credit scores has long been a source of stress. The good news? Changes in credit reporting rules have made it a little less damaging than it used to be. But that doesn’t mean it’s harmless.

So, let’s break it down—what medical debt does to your FICO score, how credit bureaus treat it, and what you can do to protect your financial future.

How Medical Debt Affects Your Credit Score

1. Medical Debt Doesn’t Immediately Hit Your Credit Report

Unlike credit card debt, medical bills don’t show up on your credit report right away. When you receive a bill from a doctor or hospital, it usually goes through an insurance claims process first. If you don’t pay it on time, healthcare providers don’t report it directly to the credit bureaus. Instead, they sell or assign the unpaid bill to a collection agency, which is when it can start creating trouble for your FICO score.

2. Medical Debt in Collections: The Real Concern

If your medical bill remains unpaid for a significant period (often at least 12 months, based on newer rules), it may be turned over to collections. Once that happens, it appears on your credit report as a collection account, which can cause a significant drop in your FICO score.

However, credit scoring models like FICO 9 and FICO 10 now treat medical collections less harshly than other types of debt. So while it still hurts your credit, it doesn’t carry the same weight as, say, a maxed-out credit card or a missed mortgage payment.

3. The 2023 Medical Debt Reporting Changes

In recent years, credit bureaus have made some borrower-friendly changes to how medical debt is reported.

Here’s what’s different:

- Paid Medical Collections No Longer Hurt Your Credit: As of 2023, if you pay off a medical collection account, it gets removed from your credit report—whereas before, it could stay on for up to seven years!
- One-Year Waiting Period Before Reporting: Previously, unpaid medical debts could show up on your report after six months. Now, credit agencies must wait 12 months before listing medical collections. This gives people more time to negotiate bills, work with insurance, or set up payment plans without immediate credit damage.
- Certain Small Medical Debts Are No Longer Reported: Debts under $500 will no longer appear on credit reports, reducing the impact of minor medical expenses.

These changes are a huge win for consumers, but they don’t mean medical debt is no longer a concern.

The Long-Term Effects of Medical Debt on Your Financial Health

A hit to your FICO score is just one of the ways medical debt can shake up your financial life. Even if your credit remains intact, the burden of unpaid bills can have far-reaching consequences.

1. Higher Interest Rates on Loans & Credit Cards

If medical debt lowers your credit score, borrowing money becomes more expensive. Lenders see lower scores as a risk, meaning you could face higher interest rates on credit cards, personal loans, and even car or home loans.

2. Difficulty Getting Approved for Housing

Many landlords check credit reports before renting out a home or apartment. A history of unpaid medical collections may raise red flags, making it harder to secure housing—even if you have a steady income.

3. Stress and Mental Health Struggles

Let’s be real—medical debt isn’t just a financial problem. It can wreak havoc on your mental health, leading to anxiety, stress, and even depression. The constant worry about paying bills or dealing with aggressive collection agencies takes an emotional toll.

4. Legal Trouble and Wage Garnishment

In extreme cases, unpaid medical debt can result in lawsuits. Some healthcare providers or collection agencies may sue to recover the money. If they win, they can get a court order to garnish your wages, meaning a portion of your paycheck goes directly to paying off the debt.

How to Protect Your Credit Score from Medical Debt

If you're dealing with medical bills and don’t want them to tank your FICO score, here are some practical steps to keep your credit intact:

1. Check for Errors on Medical Bills

Medical bills are notorious for errors—wrong charges, double billing, or insurance mistakes. Always review bills carefully, and if something looks off, call the provider or your insurance company before paying anything.

2. Negotiate Your Bills

Hospitals and doctors’ offices often have financial assistance programs, discounts, or payment plans. It never hurts to ask. Some providers may reduce what you owe if you can prove financial hardship.

3. Communicate with Your Insurance Provider

If you have insurance, make sure all your claims are processed correctly. Sometimes, bills go to collections simply because of an insurance miscommunication. Stay on top of it, and don’t be afraid to challenge denied claims.

4. Set Up a Payment Plan Before Collections Get Involved

If you’re struggling to pay a medical bill, don’t ignore it. Most healthcare providers prefer working out a payment plan rather than sending an account to collections. As long as you’re making regular payments, they’ll likely keep it off your credit report.

5. Use a Medical Credit Card or Personal Loan Carefully

If you need to pay off a high medical bill, consider options like a 0% APR credit card (if you qualify) or a personal loan with a lower interest rate. Just be careful—replacing medical debt with high-interest credit card debt isn’t always a smart move.

6. Monitor Your Credit Report Regularly

You’re entitled to a free credit report from each of the major bureaus (Equifax, Experian, and TransUnion) once a year via AnnualCreditReport.com. Check for any surprise medical collections and dispute inaccurate information immediately.

Final Thoughts: Don’t Let Medical Debt Define Your Financial Future

Medical debt is stressful, but it doesn’t have to destroy your credit—or your peace of mind. With the recent changes in credit reporting, it's less damaging than it used to be, but it’s still something to handle carefully.

If you're facing a mountain of medical bills, take a deep breath. You're not alone, and there are ways to manage it without wrecking your credit. Negotiate, communicate, and stay proactive—your financial future depends on it.

And remember, your credit score doesn’t define you. Your health and well-being matter more than any number on a report.