How To Remove Medical Collections From a Credit Report
Unpaid medical debt can damage your credit score, but you can mitigate or eliminate it.
Contributing Writer at Tally
April 18, 2022
When you visit the doctor’s office or other health care facilities, you often have health insurance that covers a large part of the bill. However, there is generally a portion left for you to pay. And if you have a high deductible or high co-insurance, the cost to you can be significant.
If you’re unable to pay a medical bill, it could get referred to a collections agency. However, you may not immediately see it on your credit report since the three major credit reporting agencies — Equifax, TransUnion and Experian — all give a 180-day grace period on reporting delinquent medical bills.
Changes are in the works, as the major credit bureaus recently announced plans to extend the grace period to one year and eliminate all medical debt under $500 from credit reports starting in the summer of 2022.
If you’ve ended up with medical debt on your credit report, you’re likely wondering how to remove medical collections from your report to keep them from dragging down your credit score. We’ll cover this and more below.
How to remove medical collections from your credit report
There are a few ways to remove medical collections from your credit report, though each one requires some legwork from you.
Medical debt can get confusing, as your health insurance company should cover some of it, and you cover the rest. Plus, there can be dozens of medical codes that go into creating your bill.
This all means that there is a chance for inaccuracy. If you notice a medical bill on your credit history is significantly higher than it should be, dispute it with the provider. At worst, they’ll verify the debt, and you have validation you’re not overpaying. In the best case, the billing department finds an error and reduces or eliminates the unpaid medical debt altogether.
Speak with your insurance company
In many cases, your health insurance should cover a large portion of your medical bills. In some cases, medical coding mistakes or other fixable issues resulted in your insurance company withholding payment.
Contact your insurance company and see if there are any changes to the bill that can increase the amount it pays, thereby lowering your burden. You may need to work as the middleman between your insurance company and the medical provider, but the possibility of lowering the debt on your report is likely well worth the work.
Negotiate a payoff and delete
Call the debt collector or medical provider, negotiate a reduced payoff settlement or a payment plan, and request that the company delete the collections account from your credit history.
Some medical debt collection agencies or health care providers will only agree to zero out the bill, but this can still negatively impact your credit score for any lender not using the latest FICO Score 9, which ignores paid collections accounts. Older credit scoring models still count those $0 collections accounts.
Because not all lenders have upgraded to the FICO 9 scoring model, deletion is a critical step in the negotiation process. Remember, though, not all collection agencies will agree to delete the account, so you may need to accept just paying it off at a reduced rate.
However, this will only be an issue for a little longer, as all three credit bureaus have announced they will drop all paid collections from consumers’ credit reports starting in the summer of 2022.
Wait them out
As we mentioned, thanks to the changes coming in the summer of 2022, paid medical debt will no longer appear on your credit report. However, unpaid medical collection accounts will remain on your credit report for up to seven years.
During that time, the older your collections accounts get, the less impact they have on your credit score. After seven years, the collections account will no longer show on your credit report.
This does not mean you no longer owe the debt — it simply means it is removed from your credit report. Even after seven years, the company can continue debt collection actions.
The impact of medical collections on your credit score
While unpaid medical bills continue having a negative impact on your credit score, the FICO Score 9 update reduced their overall negative impact compared to other types of collections and debt. However, not all creditors use FICO 9. Any company using FICO Score 8 or older could pose an issue for you.
Also, keep in mind that your credit score isn’t the only determining factor in approving you for credit. There is a manual review of your credit report, including a review of your collections accounts.
If a company deems your collections accounts are excessive, including medical collections, they may still deny you, even with a good credit score.
How to improve your credit score when you have medical collections
If you have medical collections and have no means of removing them, you can still build a good credit score over time. Here are some ways to go about this.
Use your credit card
If you have a credit card already, you can build credit, even with a medical collection on your credit report. Choose your oldest credit card account and start using it for daily purchases and paying bills, but keep it within your overall monthly budget.
At the end of each month, pay the statement balance in full and on time. This will help you show a positive payment history, which accounts for 35% of your FICO credit score.
Become an authorized user on someone else’s credit card
Becoming an authorized user on someone else’s credit card means you are authorized to use their credit card and may even receive a credit card of your own. However, you cannot change anything within the account, like the billing address or banking information.
Being an authorized user may also result in the credit card account showing on your credit report. This means all the on-time payments the cardholder makes can help improve your credit score.
Be careful, though. If the cardholder racks up a lot of debt or misses a payment, this could harm your credit too.
Get a credit builder loan
A credit builder loan is a special type of personal loan where the lender places the loan proceeds into an escrow account instead of giving it to you. You make monthly payments on the loan and interest until it’s paid in full. As you’re paying, the lender is reporting your payments to the credit bureaus, potentially building your credit score.
Once you pay off the loan, the lender releases the loan proceeds to you.
Handle your medical bills and control your credit
Medical bills are often unexpected, leaving you with a large sum to pay off. Fortunately, you have a grace period before these debts appear on your credit report. If you can’t pay them off before the grace period ends, there are ways to get them removed from your credit report or at least counteract their negative impact with positive credit, like using a credit card and paying it off monthly.
Want all the latest personal finance tips and tricks delivered straight to your inbox? Sign up for the Tally newsletter today.