Can Credit Bureaus Report Medical Bills?

A medical emergency can turn your world inside out in more ways than one. Even if you have great health insurance, chances are good you will have an outstanding balance after your insurance company pays. Failing to adhere to the terms of a payment plan or ignoring the bill can have a negative effect on your credit rating for many years to come.

The Facts

Credit bureaus can and do report all information they receive from creditors on your credit report, including medical bills. If you have an outstanding balance and do not pay, all your doctor or health care agency needs to do is send your account to a collection agency, who then most often will report your past due account to one or more credit bureaus. Medical bills make up 52.2 percent, the largest of all collection agency accounts credit bureaus receive, according to the Federal Reserve Board.

Effects

Whether you pay right away or not, once a delinquent medical bill is in your credit report it will remain there for seven years. Unfortunately, an unpaid medical bill affects payment history and total debt, two of the important scoring sections in your credit report. Payment history counts for about 35 percent of your credit rating and total debt counts for about 30 percent. The longer this debt remains unpaid, the greater effect it will have. If you pay right away, however, it will still count against you, but the passage of time will reduce its effects.

Restrictions

While provisions in the Health Insurance Portability and Accountability Act of 1996 give creditors permission to report medical bills to credit bureaus, the Fair and Accurate Credit Transactions Act of 2003 provides you some measure of protection. Provisions in this act state that credit bureaus cannot violate your privacy by disclosing information in your credit file that identifies your health care provider or discloses the nature of the treatment. In addition, creditors cannot base credit decisions on medical information in your credit file, but they can use negative information as part of an overall process of determining whether you qualify for credit.

Prevention/Solution

Do not ignore outstanding medical bills, even if you expect your insurance company to handle them in full. Review medical bills to make sure the charges are accurate and stay in contact with your insurance company and health care provider. When you know the amount for which you are responsible, talk to your health care provider and try to set up a payment plan if the balance is more than you can afford. Monitor your credit report and if a medical bill appears in your credit file, pay it as soon as possible or file a dispute if you believe the bill contains errors. A final step you can take to lessen damage to your credit report is to add a consumer statement of 100 words or less to your credit file explaining your situation.