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Are Your Medical Bills Hurting Your Credit Score? Here’s What You Can Do


The ongoing Covid-19 pandemic has resulted in enormous medical bills for many affected families. Escalating medical bills can cause substantial financial stress and may result in mounting debt troubles. If you have used debt to clear your outstanding medical bills, you must ensure to clear the debt at the earliest. Medical debt can be one of the worst forms of debt as medical expenses are essential but exorbitant at the same time.

Medical emergencies are often unavoidable but these could lead to medical bills. If these remain uncleared for a long time, you may have to make use of debt to clear them. Further, debt has to be repaid on time.

Here, we will discuss the impacts of medical bills on your credit score and report.

What is Medical Debt?

Medical debt arises because of unpaid medical bills. It is similar to any other form of debt that needs to be repaid. While no one falls into medical debt by choice, the consequences of unpaid medical bills can be equally bad. These days, medical expenses tend to be very high and often unaffordable for many, especially in case of serious medical emergencies.

Sometimes, you may not be able to pay the medical bills immediately and this can result in debt. Another reason why you could have outstanding debt is that you took a loan to pay off your medical bills. This can be a tough scenario, like medical debt as it can have far-reaching effects if not handled carefully.

How Does a Medical Debt Arise?

Medical debt can arise due to many reasons. Two of the most common factors are:

  1. Non-availability of insurance
  2. Low-income.

In metro cities like Delhi, Mumbai, Bangalore, etc healthcare costs can be unexpectedly high. For hospitalization in one of these cities, you must have health insurance else you may face difficulties while paying the medical bills.

If you do not have sufficient savings or have substantially low income, there could be a medical debt arising due to high medical expenses. This can have a tremendous negative impact as unpaid medical bills can turn into a huge liability. Many times, people tackle the situation by sourcing funds from friends, selling their assets, or spending less on their lifestyle needs. At times, people even have to use up funds meant for retirement or other long-term goals.

Medical debt often arises due to unpaid medical bills beyond the due dates. Resorting to bank loans can sound easy but this can further escalate debt troubles if not repaid on time.

What to do when medical debt impacts credit score?

Here are some important tips to use for taking charge of medical debt repayment so that it does not impact your credit score:

  1. Check for errors – Sometimes medical bills may consist of errors that could result in a higher bill amount. Ensure that there are no double charges and you have been charged only for facilities that have been used. If you have health insurance, check with your insurer about the charges that will be covered. Check for printing errors if any.
  2. Negotiate the bill – You can try and negotiate with the hospital’s billing department to reduce your medical expense obligations and associated debt. In certain cases, hospitals may consider bill reduction.
  3. Timely Payment – If you have a medical bill on hand, it is important to initiate timely payment to avoid any debt issues. If you are waiting for the insurer to pay the bills then the hospital must be informed accordingly.
  4. Loan Repayment – If you are using a loan to pay your medical bills, ensure that your EMIs are being paid promptly. This will help retain a good credit score at all times.
  5. Reduce Credit Spending – In case a medical debt has already impacted your credit score, try and reduce your credit spending to maintain a low credit utilisation ratio. This can help improve the credit score in the long run.
  6. Close Other Debts – While trying to improve your credit score after the impact of medical debt, you must aim to close out all other open debt obligations at the earliest. This will create a positive impression on the lenders and help in improving your credit score.
  7. Credit Improvement – You can take the help of CreditMantri to understand how you can improve your credit score and take charge of your credit profile.

Due to the economic disruption that resulted from the pandemic and to address a sudden drop in income levels due to job losses in 2020, the Reserve Bank of India (RBI) announced a loan-restructuring program. This program was meant to offer relief to many impacted borrowers who were struggling to repay their loans. The main idea behind the loan-restructuring plan was to provide some respite to maximum retail borrowers who were struggling to pay their EMIs.

Restructuring of a loan is marked as ‘Restructured’ in an individual’s credit report. However, the RBI has clarified that the credit ratings of individuals who choose one-time restructuring should not be impacted. Therefore, borrowers can use restructuring for their benefit instead of worrying whether it will impact their credit rating. This can especially be used while paying credit card dues.

The program allowed borrowers to repay debt as per their modified repayment capacity. Lenders were also requested to announce new repayment terms depending on the loan agreement with the borrower. This included rescheduling of EMIs, drop in interest rates, converting interest into a separate loan, or granting a loan moratorium for a maximum of two years.

As part of its moratorium program, the RBI also announced coverage of credit card debt. Under this, lenders were asked to provide additional time to borrowers for repaying credit card dues. However, many borrowers who would have borrowed personal loans to pay for credit card debt were in a fix due to this moratorium.

Credit card debt is unsecured and expensive. The annualised rate of interest on credit card debt can reach up to 40 %. This is significant as compared to secured debt such as home loans.

Most banks reject a credit card debt restructuring application since their policies may not allow it. In such cases, the borrower has to be persistent and reach out to the bank officials to explain the situation and requirements.

Loan rescheduling is somewhat like a moratorium where a borrower can postpone loan repayment. Loan restructuring, on the other hand, is combining a few open debts into a single loan that comes with lower interest rates. This helps to ease the financial burden on the borrower and can easily make a loan repayment. Loan rescheduling involves postponing repayment and loan restructuring has to go with making the repayment easier in the long run.For those who choose loan restructuring, it is important to note that there could potentially be an impact on the credit score. However, it depends on the borrower’s ability to pay the EMIs of the fresh loan. Borrowers who are unable to decide on loan restructuring can approach Credit Mantri to understand


Medical debt may impact your credit score negatively, however, it is not difficult to come out of the debt and improve the credit score. It requires a certain amount of financial discipline and appropriate usage of available funds to close out any open medical debts and also improve the credit score. It is especially important to take charge of your finances in the ongoing pandemic to ensure that you do not get impacted by heavy medical debts that become difficult to repay.


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