Medical bills would not appear on a consumer credit report unless they have been sent to collections. That means that your account is no longer with the hospital where you had the treatment, but belongs to a separate company that purchased it instead. These third-party debt collectors absolutely can (and usually do) report the three credit reporting agencies – TransUnion, Experian, and Equifax.
However, you’re about to be in luck.
Up until recently, outstanding healthcare balances that have been absorbed by collection agencies would remain on a person’s credit report for seven years, as per the Fair Credit Reporting Act – even if the debt was satisfied. Yet soon collectors must comply with a new rule that resulted from a settlement between the three credit reporting agencies and the New York Attorney General’s office.
Essentially, if you make good on a bad medical bill, the credit reporting agencies will not be allowed to list it on your reports from that point forward. All evidence of that account will be permanently purged from your files. Additionally, there will be a six-month waiting period before they appear in the first place, which will allow consumers more time to deal them them effectively.
Naturally this is great news if you’re concerned about your credit reports being assessed, as they’ll look far cleaner than they do now. The collection account won’t be factored into your credit scores anymore, either. Such scores as the FICO rank a person’s payment history most highly, and since collection activity is embedded into that category, your scores would continue to be downgraded as long as the collection account remains on the report, paid or unpaid.
Therefore when the collection bill is gone, your scores should rise.
Paying collectors off has other benefits, too, such as not having to field demanding calls and letters anymore and avoiding the possibility of being sued. If you don’t have all the money you owe, you can attempt to negotiate a settlement where you pay a fraction of the debt. Do so and you’ll save money while also repairing your credit rating. Just be aware that forgiven sums over $600 can trigger a larger income tax bill at the end of the year.
Then again, maybe you can’t or don’t want to deal with this bill. If funds are tight, that’s understandable. Don’t worry too much, though, as the older a negative item becomes, the less it tends to matter to credit report viewers – typically lenders, but also landlords and employers – and your credit scores.
This is because what you did long ago is less of a predictor of the type of credit and money manager you are than what you’ve been doing recently. For this reason your current borrowing and repaying behavior carries more credit rating weight than accounts that will soon drop off your reports.
So should you reach out to the collector and pay? My general answer is yes. If you have the cash and legitimately owe it, go ahead and contact them with your offer (either for a settlement or to pay in full). Then again, this account only has three years remaining on your reports.
Whichever company has it may have forgotten about you or have simply given up, especially if they can no longer take legal action against you. Check the statute of limitations for lawsuits for your state. If the time frame has run, letting the account ride until the seven years is over can make more financial sense.