Medical Debt in Collections

Most debts, including medical bills, can go into collections if you refuse to pay them. The original creditor might hire a collection agency or write off the bill as a bad debt, then sell it to a third-party collection agency to recoup some of the lost money. Doctor, lab and hospital bills hurt your credit rating if you neglect them long enough to get them sent to a debt collector.

Credit Reports

Your credit reports show a lot of your financial information, but medical debts are not typically reported to the Equifax, Experian and TransUnion credit bureaus. The bureaus focus more on installment loans and accounts with revolving credit limits. Bills for doctor visits, hospital stays and medical tests can show up on your credit reports if a collection agency takes over the debt. Collectors report all types of accounts to the bureaus, and their entries are perceived as negative because they are due to long-unpaid bills.

Effects

Medical debt that goes to a collection agency has a very bad effect on your credit rating because it falls into the worst possible credit scoring category. Bill payment history and related data, including collection agency accounts and court judgments, make up 35 percent of your credit score, according to the MyFICO scoring website. Your score drops as soon as a debt collector starts reporting your unpaid medical bills to the three credit bureaus because scoring formulas use credit report information.

Considerations

Privacy laws limit the amount of information your doctor or other health care provider can disclose to a collection agency. The debt collector is entitled to your name, address, Social Security number, birth date, account number and previous payment history on the account, according to the Privacy Rights Clearinghouse. Medical information, such as the condition for which you were treated, may not be passed along to collectors.

Resolution

Medical debt-related collection accounts hurt you for as long as they are visible on your credit reports, even if you eventually pay the bills. Get them removed by promising to pay what you owe if the debt collector erases the account completely instead of just marking it as "paid," Walecia Konrad of The New York Times website advises. Make your deal and get it in writing before turning over any money to the debt collector.

Warning

A type of identity theft known as medical identity theft may cause you to wrongfully have collection agency accounts in your name, the Privacy Rights Clearinghouse warns. The thief either gets medical treatment in your name, incurring the bills under your identity, or uses your health coverage information to obtain services, using up your benefits and leaving you to be billed for any deductibles and charges that are not covered. Complain to the medical provider, collection agency and credit bureaus if you have been victimized by this crime.