Does Not Paying Medical Bills Affect Credit?

Doctors are in the business of providing medical care, not bill collecting, so they do not typically report unpaid accounts to the credit bureaus. A bill does not affect your credit unless it shows up in your TransUnion, Experian and Equifax credit bureau records. Some doctors sell bad debts to collection agencies, and most debt collectors transmit information to the bureaus. Your medical bills hurt you if they wind up with one of those agencies.

Definition

Medical bills encompass a wide range of health-related obligations. These accounts include doctor and hospital bills and bills for lab tests, medical procedures, diagnostics and surgery. Insurance may pay some of these bills, leaving you responsible for the balance, or you may be liable for the entire owed amounts yourself if you have no coverage. You usually get a statement alerting you to the unpaid amount after your insurance company handles its portion of the account, but you may not realize a bill is not paid until you get a dunning notice from the service provider or collection agency. Your doctor or hospital might accept payment arrangements or your bill might go to a collector.

Credit Reports

Collection agencies share information with the credit bureaus, including unpaid medical accounts. A debt collector may call you and threaten to report the bill to TransUnion, Experian and Equifax. You are entitled to one free credit report every 12 months from those three bureaus, which lets you check if the collector followed through with the threat. Order the reports from AnnualCreditReport.com, the only official free source. The medical bill hurts your credit if it is listed on the reports.

Effects

Your credit score depends on the data on your credit reports, which is distilled into a three-digit number. Certain types of information are weighed more heavily, according to the MyFICO scoring firm. Your payment dates are particularly important, since 35 percent of your score comes from your payment history and a collection account represents an unpaid obligation. Lenders who check your credit reports for credit line increases or new accounts see the medical bill and count it as negative information when they make their decision.

Solutions

The simplest solution is to pay the collection agency with an agreement that it erases the account from your credit reports. Insist on this condition because a paid-in-full collection account is still bad for your credit score. You may be able to remove the account from your credit reports without paying it if the debt collector made a mistake in the entry. You may challenge any items with errors in them, according to the Federal Trade Commission. TransUnion, Experian and Equifax are obligated to erase the collection agency account if the debt collector cannot prove its data is correct. Otherwise, the medical bill drops off your credit reports on its own in seven years.