Medical Debt and Credit Scores

Should medical debt be treated like just any old debt? Or should it have a special designation when computing a credit score?

A study from the research organization Demos advocates a special designation that would cause less negative impact on a credit score for medical debt than for other kinds of debt. The 2007 study documents the effects of medical debt on lower and middle income American families.

The failure to draw a distinction between a one-time unlucky bout with medical expenses and less responsible consumer debt means perfectly reliable people have unnecessary trouble with buying homes, starting businesses, and taking on other projects.

"American families are running out of options and turning to credit cards to meet necessary medical expenses," said Cindy Zeldin, report co-author and Federal Affairs Coordinator for the Economic Opportunity Program at Demos. "Congress should address this new and serious consequence of our nation's growing health care crisis before more families go into debt, and risk their financial stability, to get the medical care they need."

The study found that 29 percent of low to middle income households have debt from medical expenses, with 69 percent reporting a major medical expense. Those families had 46 percent more debt than indebted households that had no medical debt. 

The study’s other recommendations include limiting medical providers from offering financial arrangements, raise oversight over medical credit cards and lines of credit, and other measures.

Peggie Sherry, a person who survived a bout with cancer, said the study hit the spot.