Can medical debt impact a credit score

Your medical history is certainly not part of a credit report, but past due medical debts can affect your credit reports and credit scores if a doctor or hospital hires a medical debt collection agency to pursue payments.

Medical collection agency

A sickness, illness or surgery can result in unexpected and unplanned medical bills. While health insurance may help, many people still struggle to pay medical bills while trying to put food on the table.

As of Sept. 15, 2017 the three major credit bureaus (Experian, TransUnion and Equifax) employ a 180-day waiting period before medical debt appears in a credit history. This six-month grace period is designed to give you time to correct any errors on your bill, pay the bill or get your insurance company to pay it, figure out a payment plan or otherwise resolve the problem.

Medical debts are given less weight: Newer scoring models weight medical collections less than other types of collections so that they don’t impact a score as much. However, not all creditors use these new scoring models, so medical collections could still hurt your credit.

When you receive your bill, be sure to examine it carefully and compare it with the explanation of benefits provided by your health insurance provider. If you believe you've found an error, contact your medical provider or health insurance company.

If you’re facing mounting medical expenses, here are some things you may want to consider that may help prevent medical bills from appearing on credit reports:

Contact your health insurance company. Know your coverage and follow up to ensure the company is paying costs it has agreed to cover.

Negotiate with your health provider. If you can’t afford to pay a bill, try to work with your medical provider to reduce the amount owed or set up a payment plan.

If you believe medical debt has been listed on your credit report erroneously, contact the medical provider or collection agency first. You can also file a dispute with the three major credit bureaus.

If possible, prepare for medical procedures in advance by finding out what your insurance will cover and what costs you’ll be responsible for.

It’s always a good idea to regularly review your credit reports to ensure the information is accurate and complete. You’re entitled to a free copy of your credit report from each of the three credit bureaus every 12 months.

New York State Reduces Medical Debt Statute of limitations (SOL) to Three Years

On April 3, 2020, New York State Governor Andrew Cuomo signed the New York's 2021 Executive Budget into law. Senate Bill S7506B

A key item that was the addition of § 213-d to New York's Civil Practice Law and Rules. Unlike previously, medical debt covered under the standard six-year statute of limitations covering contracts. The new section titled Actions to be commenced within three years; medical debt, states that;

"An action on a medical debt by a hospital licensed under article twenty-eight of the public health law or a health care professional authorized under title eight of the education law shall be commenced within three years of treatment."

While the amendment takes effect immediately (April 3, 2020), the bill is silent as to whether the law will have retroactive effect. However under New York common law, a statute will generally not be applied retroactively unless the amended statute expressly provides for retroactive treatment. Accordingly, the new three-year statute of limitations for medical debt will cover debts resulting from treatment occurring on or after April 3, 2020.

The SOL is tied to the date of the patient's "treatment" and not the traditional SOL trigger date of contract breach. (The general rule applicable to contract actions is that a six-year Statute of Limitations begins to run when a contract is breached or when one party omits the performance of a contractual obligation.)

Hospitals and health care professionals covered under the new rule should examine existing accounts receivables and consider if accelerated collection efforts are needed.

This change does not explicitly impact the ability to report the delinquent debt to the credit reporting agencies within seven years of the delinquency under the Fair Credit Reporting Act (FCRA).