Do Hospital Bills Affect Your Credit Rating?

Even if you have health insurance, an unforeseen medical emergency can add expenses quickly. Not having health insurance can make matters even worse, as you accumulate debt the hospital officials expect you to pay off. Many people believe unpaid hospital bills have no bearing on their credit score, but that's not entirely true.

Collection Agencies

When you lapse in payment on your existing hospital bills, the hospital will continue attempts to collect the debt. If it does not receive payment from you, it turns your debt over to a collection agency, which picks up where the hospital billing office left off in an attempt to collect payment. Whenever an account is turned over to a collection agency, the original creditor reports that action to the credit bureau, which distributes the information to credit reporting agencies.

Creditors Don't Know the Circumstances

According to the website for Experian, one of the three approved credit reporting agencies, when your lapsed hospital bill is sent to collection, the name of the hospital or institution at which the account was originally generated does not appear on your credit report. Experian only lists the account as "Medical Collection" on your report, but it reveals no information about your medical condition or the circumstances under which the debt accrued. While this is intended to protect your privacy, it may not help gain sympathy from a creditor, which won't know the full circumstances surrounding your situation.

Medical Billing Errors

Sometimes medical billing errors can work against you. For example, the hospital billing department may fail to bill your account to your insurance provider, or the insurance may not pay quickly enough, resulting in the account being turned over to a collection agency. Even though you are not at fault for the error, it can negatively affect your credit rating until the error is addressed. Reporting the mistake to the credit bureau and providing proof that the debt is invalid are required to have the debt removed from your credit report.

Seven Years Bad Credit

No matter how small your hospital and medical bills are, failure to pay them can negatively affect your credit for as long as seven years. The only solution is settling unpaid accounts as quickly as possible. Those settled accounts remain visible on your credit report for up to seven years, showing potential creditors you were lax in payment, but they also show you did eventually settle the debt. Making the effort to settle your debts may be enough to show potential creditors you are taking responsibility for your debts.