The truth about medical collection accounts and your credit reports

MSNBC's Red Tape Chronicles has a great article today about the impact of medical collections records on your credit. In their example, a man who had received treatment for an alcohol addiction was surprised to see a collection record related to that care appearing on his credit reports.

Here are four important facts you should know about medical collection records:

• Medical collection information must be masked on commercial credit reports by law. The FACT Act specified that medical collection data be blocked out on credit reports sold to lenders, credit card issuers, employers, etc. It's not hard to image the negative consequences of having a collection record with "Cherry Lane Mental Hospital for the Severely Deranged" on your credit reports! When businesses pull your credit report for the purpose of an application, the medical office name is blocked out and only the financial information remains.
• Medical collection records do appear on your personal credit reports. When you order your own credit reports, these medical collection records remain unmasked. This is so you can verify that the accounts are indeed accurate and can contact the appropriate business if needed.
• Medical collections remain on your credit report for 7 years. Period. Paying off a collection debt does not cause it to be removed from your report. Don't be bullied by collection agents telling you that payment will cause the record to disappear. You can read your rights under the Fair Debt Collection Practices Act online.
• Medical accounts do not appear on credit reports on their own. Only medical collection records for severely overdue accounts will be recorded on your credit history. A simple visit to a hospital or clinic will not be reported.

Do you have a medical collection record on your credit reports? Want to share your story of dealing with aggressive collectors? Post your feedback in the comments section below.

Comments

[mapgirl]

I take serious issue with medical offices and their practices. I never got a call about a deliquent bill. If I had, I would have told them that the address the bill was sent was incorrect. It was entirely their fault since the other billing parties got the address right. It's stupid that they don't even make a single courtesy call.

[Emily Davidson]

I agree with your concerns. Far too many health care providers are "trigger happy" when it comes to selling accounts to collections. Have you tried wortking with the medical office to resolve the problem?

[John Ulzheimer]

A little bit of inside info...

Credit score developers don't like their models to consider things that the general lending public doesn't consider to be true "credit related" data, such as medical collections. They recognize the gross inefficiency of medical billing and insurancce claims cause a huge percentage of all medical collections.

If the credit bureaus would ever get off their duff and clearly code ALL medical related collections as such, I believe you would see a change for the better.

However, collection agencies, who are huge customers of the credit bureaus (revenue) would fight the bureaus tooth and nail to prevent this from ever happening. What's the motivation to pay up if it's not hurting your credit scores?

What's profitable isn't always what's right.

[Emily Davidson]

Great insight, John!

[Scott]

After a severe back injury while without insurance, i now have two significant medical bills now in collection, which have destroyed my credit. What affect will paying the debt now have on my credit score? Or is it worth it to leave the bills alone and in 7 years, they will be gone from my report. I am relatively young (26) and had perfect credit, although limited prior to this. The accident happened between gradutating college and starting my job, when there was no way i could pay the bills. THanks for your help.