Do medical bills show up on credit reports?
To Her Credit
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also writes regularly for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Steward Radio and other programs. See her website SallyHerigstad.com
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Dear To Her Credit,
Are medical bills still being reported on credit reports? I
have heard that medical bills are no longer being reported. If this is the
case, why is it so hard for me to find a lender?
I am interested in purchasing a home instead of paying for
something every month that will never be mine. -- Octavia
When you owe money to your doctor or to a hospital, it
generally does not show up on your credit report.
However, if the bills go unpaid long enough and end up in
collections, they're going to be on your credit report, and they will affect
your ability to get credit, including a mortgage.
Becky Walzak, president of Looking Glass Group in Deerfield
Beach, Fla., and an expert in loan quality assurance, says, "Frankly, we
see a lot of medical bills on credit reports."
Often, the bill has gone to collections because it is under
dispute. "The most frequent reason is that they are arguing the claim -- they
think the insurance company should pay it, they think the bill was outrageous,
a variety of reasons," says Walzak.
Sometimes even a small bill can cause trouble. "The
hospital forgets about it and it goes to collections, and people only find out about
it when they pull their credit report," she says.
A more serious problem, from the point of the mortgage
lender, is a raft of major medical bills. Too many bills show an inability or
unwillingness to pay bills, or they may point to a potential bankruptcy in the
In some cases, the patient may simply be waiting for the
insurance company to go through the paperwork. Meanwhile, doctors and hospitals
send large bills to collection agencies sooner than they would small ones. "We
take these much more seriously, because how are you going to pay these?"
says Walzak. "If you are going to file bankruptcy, are these going to be discharged?
That's when your medical bills are going to show up."
Not only do medical bills in collections show up on your
credit report, but they also factor into your score. "Lenders will look at
it as potential disregard of obligations," says Walzak.
Here's what you should do if you have medical bills:
- Pay them off, if possible. If they are small bills,
perhaps that you are disputing with a medical provider, a mortgage lender may
require you to pay or settle the bills before you can buy a house.
- For large bills, agree to a payment plan with the
provider, and then stick to it. If you can keep the bill from going to a collection
agency, potential lenders won't even hear about them. Many people believe that if they send something -- anything --
to the doctor, their accounts won't be sent to collections. In truth, it
depends on the doctor and on your bill. If you send $1, obviously, the office
will not be impressed. If they are satisfied that you're trying to pay,
however, they're not likely to turn you over to collections.
- If you have a significant bill in dispute, put a statement
on your credit report. For example, Walzak knows someone who had dental work
done. The patient received half the treatments and was dissatisfied, so she
stopped treatment. The dentist billed her for the entire amount anyway. In
situations like this one, you should notify the insurance company and medical
provider that you did not receive the services you are being billed for. Lenders look at more than your credit score. Sending statements to the credit bureaus tells potential lenders that you're conscientious about
what's going on with your finances.
- Pull your free credit report regularly. You'll want to
keep on top of any negative items and either dispute them or add explanation
statements. You can pull them free once a year for each of the big three credit bureaus (Equifax, Experian and TransUnion) at AnnualCreditReport.com.
What lenders are looking for, according to Walzak, is the
concern is for disregard of obligation. "We're looking to make sure that
you have a concern about paying your debts," she says. That's as true for
medical debts as for anything else you owe.
What about medical credit cards? "It's just another
credit card," says Walzak. If you apply for a medical credit card before
treatment, the balance and other information is reported to the credit bureaus
just like any other credit card.
Always resolve medical debts as quickly as possible, just
like you would any other bills. Take care of your credit, and you will soon be
in that house that you can call your own!
See related: Seek help for unexpected medical bills, How to resolve a bogus medical bill
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