Published March 12, 2013
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.
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 future.
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:
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!