Ways to Keep Medical Debt From Damaging Your Credit

About 100 million adults in the United States are currently carrying some form of medical debt, according to KFF Health News.

A federal judge in Texas struck down the Consumer Financial Protection Bureau's medical debt rule after it had been finalized earlier under the Biden administration. The policy was expected to remove medical collections from the credit reports of about 15 million Americans.

The court said the CFPB had exceeded its authority under the Fair Credit Reporting Act. As a result, Equifax, Experian, and TransUnion resumed reporting medical collections above $500, putting those balances back on credit reports.

CreditNinja outlines a four-step process that many patients may not realize is available:

• First, the hospital sends the bill to your insurer, which pays part of it or denies it.
• Next, the hospital bills you for the remaining balance. That begins the internal dispute window, which is usually 30 days.
• Then, a 180-day grace period begins before the account can be reported to a credit bureau.
• If the bill still goes unpaid, the account is sent to collections and can then appear on your report.

The system tends to fail patients in three main ways.

One is coding disputes, when the hospital and insurer argue over which CPT code should apply and the patient is left in the middle.

Another is out-of-network staff working at an in-network facility, such as anesthesiologists, radiologists, and emergency room doctors who bill outside the hospital contract even when the patient entered an in-network hospital.

The third involves guarantor signatures on admission forms, where signing standard responsibility language during a family member's emergency admission can create personal liability for the full bill.

That is what happened to Bridget Narsh in North Carolina, she told KFF Health News. A bill she expected to be $6,700 instead became a $101,546 invoice signed off by the state attorney general's office.

Many people are guessing about the consequences, but the numbers can be severe. A single medical collection can lower a credit score by 50 to 100 points, depending on where the score started. Even after payment, it can remain on a report for up to seven years.

How to Keep a Medical Bill Off Your Credit Report

Three steps can stop a medical bill from ever reaching your credit score, and the timing matters.

First, do a 48-hour bill audit. As soon as the bill arrives, request an itemized version in writing from the hospital billing office. Federal law requires the hospital to provide it within 30 days of the request. Review every Current Procedural Terminology, or CPT, code you do not recognize. If you were treated at an in-network facility and any provider on the bill was out of network, raise the No Surprises Act in writing with both the billing office and your insurer.

Complete this within the first 30 days, before the 180-day clock begins.

Second, if the debt has already gone to collections, send a debt validation letter. Write to the collector within 30 days of first contact and request validation. Under the Fair Debt Collection Practices Act, the collector must pause collection efforts and provide written proof of the debt.

The CFPB offers sample validation letter templates on its consumer resource page.

Third, if the collection is already on your report, file disputes with Equifax, Experian, and TransUnion under the Fair Credit Reporting Act. Include records showing the debt is inaccurate, cannot be verified, or falls below the voluntary $500 threshold. The bureaus have 30 days to investigate. If the collector cannot verify the debt in that time, it must be removed.

What to Do If a Collection Is Already on Your Report

If the collection is already listed and you do owe the money, two options can still help.

One is a pay-for-delete negotiation, in which you offer to pay in full in exchange for a written promise to remove the collection entry.

The other is a goodwill removal letter for a paid collection, where you ask the collector to remove it as a courtesy.

Both approaches work more often than many people expect, especially with medical debt.

Preventing Medical Bills From Hurting Your Credit

The best way to avoid damage is to catch unpaid medical bills and billing errors before they reach your credit report. In short:

• A federal court ruling overturned the CFPB's medical debt protection.
• The three major bureaus have restored medical collections above $500 to consumer reports.
• The protections that still matter are the $500 threshold, the No Surprises Act, the 180-day grace period, and the Fair Credit Reporting Act dispute process.
• The three main actions to use are the bill audit, the debt validation letter, and the FCRA dispute.