Can Medical Debt Be Reported to Credit Reporting Agencies?

The three major consumer credit reporting agencies, Experian, Equifax and TransUnion, compile information provided by creditors into specific credit history reports for each consumer. Lenders then examine your credit report for your past financial behavior when determining whether or not you qualify for new lines of credit or loans. All types of debt, including medical debt, can appear on your credit report.

Reporting Medical Debts

As a rule, health care providers do not report the payments you make on your medical debts to the credit reporting agencies. Its only when you stop making payments that a medical debt will appear on your credit report. Like any creditor, health care providers sell nonperforming accounts to collection agencies. Provided the collection agency that purchases your medical debt maintains a contract with the credit reporting agencies, it reserves the right to file a report. Once this occurs, your medical debt will appear on your credit report as a derogatory collection account.

HIPAA Privacy Laws

The Health Insurance Portability and Accountability Act, commonly known as "HIPAA," protects the private medical information of all consumers. While HIPAA allows health care providers to share information about your medical debts with collection agencies, it restricts collection agencies from reporting sensitive medical information to the credit reporting agencies. Lenders, insurance providers, employers and other third parties have the right to pull your credit records. Thus, by restricting what collection agencies can and cannot report, HIPAA keeps your medical information private.

Time Frame

Debts held by collection agencies, such as medical collection accounts, cannot appear on your credit report for longer than 7.5 years. While the Fair Credit Reporting Act places a seven-year reporting period on all collection accounts, the seven-year period does not begin until your original medical debt is 180 days delinquent. Thus, if your health care provider sells the debt relatively quickly, it may appear within your credit file for slightly longer than seven years.

Effects

Medical debt differs from other types of debt in that the expenses are not voluntarily. An unexpected illness or injury can leave you owing thousands of dollars in medical bills that you cannot pay. Because medical debt is not voluntary, not all lenders view medical collections as a risk factor when evaluating your credit history. For example, an individual who runs up a credit card bill and does not pay it often represents a higher credit risk to lenders than a consumer who has outstanding medical debt for an emergency surgery, even though the credit scoring system views all collection accounts as derogatory.