Do My Medical Bills Affect My Credit Rating?

Credit card issuers, banks, loan companies and other financial institutions report data to TransUnion, Equifax and Experian. These three national credit bureaus add it to their files, and it shows up whenever your credit reports are reviewed. Doctors and hospitals do not typically report bills to the bureaus, but medical debts can show up if they go to collection agencies.

Reporting

Collection agencies are hired by creditors, including doctors and medical facilities, or purchase charged-off debts at a discount, then profit by collecting the full amount or a negotiated settlement. They use various aggressive methods, like letters and telephone contact, to get the money. Some add the debt to the consumer's credit reports, where it interferes with opening new accounts. Collection accounts of any kind, including medical bills, fall under "payment history" in credit scoring formulas. The MyFICO scoring website explains that this affects 35 percent of the entire score.

Duration

Medical bills that go to collections do not stay in your credit files indefinitely. The Federal Trade Commission (FTC) website explains that the duration is seven years, after which TransUnion, Experian and Equifax erase them. Your reporting period starts on the date you let the account get past due.

Judgments

Debt collectors sometimes sue you if a bill is especially large or you have known income sources that can be attached after a legal judgment. Court records are public, so the judgment appears on your credit reports if you are successfully sued for a medical bill, according to the FTC site. This adds further damage to your credit rating.

Settlement

Debt collectors primarily want to get your money, and hurting your credit is a side effect of the collection process. Collection agencies can agree to wipe out the accounts in your credit bureau files if you pay in full or settle for a mutually agreeable sum, according to Bankrate.com writer Brigitte Yuille. Ask for this while negotiating with a collector, as most firms do not voluntarily offer to fix your credit records. Insist on a written promise prior to paying off the medical bill.

Warning

All states impose a statute of limitations on medical bills and other debts. Creditors and collection agencies may not sue you once this time frame passes. MSN Money columnist Liz Pulliam Weston warns that unscrupulous debt collectors pay a few pennies for old debts, then try to strong arm people into paying them with false threats. They cannot legally sue you or put medical bills on your credit reports after the statute passes, so ignore their scare tactics.