Consumers often feel confused about how medical debt affects their credit score. Everyday I get calls from consumers asking if medical debt will count against their credit score. Frequently, they think it won’t. And very often their lender will have told them that.

The Truth

Medical debt counts against your credit score just like any other debt. A medical collection on your credit report can bring down your credit score 40-80 points just like any other debt. Got that? Medical debt counts against your credit score.

The Confusion

The confusion can come from the mortgage industry. Some mortgage loan officers will tell their clients that medical debt can’t be used against them so it doesn’t matter. The loan officer is referencing current Federal Housing Authority (FHA) and other lending guidelines that allow medical debt to be overlooked when making a lending decision. They simply subtract any medical debt that appears on the credit report from the debt obligations. The justification is that medical related debts are not pre-planned events and can not be considered a reliable factor that determines one’s ability to repay a home loan. However, even though FHA and other programs remove the medical debt from their equation, the credit score does not. Consumers will have to remove completely from the credit report OR settle the  negative debt and show “paid in full” or “settled” OR build positive credit to raise the credit score.

What to do about Medical Debt

Since medical debt is like any other debt, it needs to be settled or removed from the credit report. Here’s how:

Step 1 – Dispute the debt with the debt collector. They should send copies of the medical billing so you can verify whether the amount they say you owe is accurate. Download – How to Dispute Medical Debt here.

Step 2 – If the debt they report for you is correct, then settle. Many medical debt collectors are willing to settle for less than what’s owed if the debt is over $500. Some are willing to delete for a settlement, too. Download – How to Negotiate Medical Debt here.

Step 3 – Pay the debt per the agreed upon terms. Be sure to keep proper documentation so you have proof of the agreement and proof of payment.

Reasons for a deletion:

a) If you never received notice of the debt, you maybe able to get the debt deleted. Ask where they sent the debt notice or made any phone calls. If it was at another address or phone number, assure them that it would have been paid if you’d been properly notified. Further explain that you were not properly notified before the negative entry was placed on your credit report.

b) The doctor or billing company did not send you a proper notice. Since no billing came from the doctor, there was no reason to know a bill was due before it appeared on the credit report. Sometimes, all you need to do is call the doctor and ask that they remove the item once you settle the bill is all it will take to clear the item.

If you are having issues with medical debt call us at (214) 506-2500 or email [email protected]