Medical Debt Doesn't Affect Credit Here's What You Need to Know

Medical debt can be a significant financial burden, but the good news is that it doesn't directly affect your credit score.

In 2021, the Consumer Financial Protection Bureau (CFPB) announced that it would no longer consider medical debt as part of credit scores for most people. This change aims to alleviate the financial stress that comes with medical debt.

As a result, many people who have struggled with medical debt can breathe a sigh of relief, knowing that it won't haunt them in the form of a lower credit score.

Medical debt is any balance owed after receiving a medical treatment, health care service or health product.

You might be able to pay the entire bill at once, but medical bills are often large, making it difficult to pay the full amount upfront.

Any bills you receive for the portion your insurance didn’t cover are what you owe, contributing to your medical debt.

If your medical bill goes unpaid for a certain amount of time – usually at least 90 days – your provider will turn your medical debt over to collections, but some providers may wait 180 days while others may wait only 60 days.

Working out a repayment plan with your provider is often a viable option to manage your medical debt.

Medical debt can be a significant financial burden, but it surprisingly doesn't affect your credit score. In the US, medical debt is the leading cause of bankruptcy, with 66% of bankruptcies attributed to medical expenses.

The good news is that medical debt is not considered a "bad debt" like credit card debt or personal loans. This means that it's not reported to credit bureaus in the same way, and therefore doesn't impact your credit score.

However, medical debt can still have a significant impact on your financial well-being. According to the article, medical debt can lead to a 50% reduction in credit utilization, making it harder to get approved for credit in the future.

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If you're struggling with medical debt, know that you're not alone. In 2019, 58% of Americans reported putting off medical care due to cost concerns, highlighting the need for affordable healthcare options.

The best way to avoid the negative impact of medical debt is to prioritize your healthcare expenses. Make sure to communicate with your healthcare providers about your financial situation, and explore options for financial assistance or payment plans.

Medical debt doesn't affect credit scores, but that doesn't mean it's not a major financial burden.

Recent developments suggest that medical debt is a significant problem in the US, with over 77% of bankruptcies attributed to medical expenses.

Many people struggle to pay medical bills, with 64% of Americans saying they've had to cut back on essential expenses to pay for medical care.

The average medical debt per household is around $18,300, a staggering amount that can have long-term financial consequences.

Some states have taken steps to address medical debt, such as California's law that prohibits medical debt from being reported to credit bureaus.