Credit Reporting

Providers and collections agencies may use adverse reporting to credit agencies to pressure a patient to pay medical bill, even if the patient has disputed that bill. What does this mean and what can a patient do about it?

Overview

A credit report is a statement that has information about your credit activity and current credit situation such as loan paying history and the status of your credit accounts. Credit reporting agencies collect and store financial data about consumers that is submitted to them by creditors, such as lenders, credit card companies, and other financial companies. Hospitals, medical groups and other health care providers may also submit to agencies financial information about their patients. There are three large credit reporting agencies – Equifax, Experian and TransUnion.

Lenders use credit reports to help them decide if they will loan you money, and at what interest rates. Lenders also use your credit report to determine whether you continue to meet the terms of an existing credit account. Other businesses might use your credit reports to determine whether to offer you insurance; rent a house or apartment to you; and provide you with cable TV, internet, utility, or cell phone service. If you agree to let an employer look at your credit report, it may also be used to make employment decisions about you.

Not all providers report unpaid debt to credit agencies. Few physician practices do so. Hospitals are the most active provider type in reporting unpaid debt to credit agencies. A 2022 survey found that 55% of hospitals reported unpaid debt to credit agencies, 26% did not, and 19% had unclear practices on credit reporting.

Medical Debt Credit Reporting Rules

Credit reporting has rules specific to medical debt at national and state levels.

National Credit Reporting Rules for Medical Debt (Fair Credit Reporting Act)

Medical debts less than $500 will not be reported.
The provider or agency must wait at least a year from the date of service before it may report a medical debt.
No paid debt is included on credit reports. If a debt is reported, and it is later paid, it must be removed from the credit report.
Unpaid medical debt remains on a credit report for seven years.

State Credit Reporting Rules for Medical Debt

Some states restrict or entirely prohibit (i) providers and collections firms from reporting medical debt to credit agencies, and (ii) credit agencies from using medical debt in credit reporting and scoring..
Note that state laws are applicable based on the state in which the medical services were rendered, not the state in which the patient or provider may primarily reside or do business.

These 15 states have medical debt credit reporting restrictions and rules. No paid debt is included.

California	Colorado	Connecticut
Delaware	Illinois	Maryland
Maine	Minnesota	New Jersey
New York	Oregon	Rhode Island
Virginia	Vermont	Washington

Proactive: Keeping Medical Debt Off Your Credit Reports – Validation Notice

The federal Fair Debt Collection Practices Act (FDCPA) requires creditors must give a Validation Notice to a consumer prior to reporting a debt to a credit reporting agency.

A Validation Notice must include the following:

The debt collector’s name and the mailing address at which the debt collector accepts disputes and requests for original-creditor information.
The consumer’s name and mailing address.
The account number, if any, associated with the debt on the itemization date, or a truncated version of that number.
The name of the creditor to whom the debt currently is owed.
The amount of the debt on the itemization date.
An itemization of the current amount of the debt reflecting interest, fees, payments, and credits since the itemization date.
Information about consumer protections.

The date that the debt collector will consider the end date of the validation period and a statement that, if the consumer notifies the debt collector in writing on or before that date that the debt, or any portion of the debt, is disputed, the debt collector must cease collection of the debt, or the disputed portion of the debt, until the debt collector sends the consumer either verification of the debt or a copy of a judgment.
The date that the debt collector will consider the end date of the validation period and a statement that, if the consumer requests in writing on or before that date the name and address of the original creditor, the debt collector must cease collection of the debt until the debt collector sends the consumer the name and address of the original creditor, if different from the current creditor.
The date that the debt collector will consider the end date of the validation period and a statement that, unless the consumer contacts the debt collector to dispute the validity of the debt, or any portion of the debt, on or before that date, the debt collector will assume that the debt is valid.
If the debt collector sends the validation notice electronically, a statement explaining how a consumer can, as described in paragraphs (c)(4)(i) and (ii) of this section, dispute the debt or request original-creditor information electronically.

How Can I Dispute a Validation Notice?

If you receive a Validation Notice regarding a debt from a disputed medical bill you want to respond as soon as possible, and no later than the date that the debt collector will consider the end date of the validation period. Consumers have 30 days to dispute a debt from the date of the Validation Notice.

On request, Patient Fairness will issue a dispute of a medical bill case debt to a creditor on behalf of a customer. As soon as you receive a Validation Notice, log the communication in your Patient Fairness case and request to dispute the debt to the creditor.

Reactive: What if Medical Debt is Reported for my Medical Bill?

Adverse credit reporting is a legitimate concern for patients with problem medical bills. That does not mean patients are helpless against the tactic, or that patients should abandon a medical bill dispute because of the tactic.

If you identify that debt related to a disputed Medical Bill has been added to a credit report consider the following:

Does the reporting violate rules for medical debt, including those applicable to the state in which the services were rendered?
Has the Provider failed to respond adequately or at all to your Letter of Dispute?
Are there other errors on the medical debt reporting separate from your Letter of Dispute?

If the answer is yes to any of these questions you may consider disputing the credit report directly with the credit reporting agency. You likely have the strongest case to dispute credit reporting that violates federal or state rules and laws, including the federal No Surprises Act. If you dispute credit reporting based on a provider’s or bill collector’s failure to respond to a Letter of Dispute, the credit reporting agency likely will base its decision on nature of the issues and concerns in your Letter of Dispute.

Even if you will not dispute a credit report, or a credit reporting agency denies your dispute, consider the following:

How important is my medical bill dispute?
Is the dispute over a large amount of money?
Is the adverse credit reporting likely to pose problems for me in the near term? Am I planning to take out a loan or take other action that the adverse credit may impact?
Adverse credit reporting should be removed once a debt is paid. Am I comfortable continuing to pursue my medical bill dispute while the credit reporting is active?

You want to balance the costs and aggravations tied to the problem medical bill against the costs of abandoning your medical bill dispute so to remove the adverse credit reporting. Persons often conclude that their medical bill dispute is more important than the threat of credit reporting. Remember that the credit report can be corrected if the Medical Bill dispute is later settled, so a decision to continue a medical bill dispute does not close the door to clearing adverse credit reporting.

How Can I Dispute a Medical Debt Reporting Error?

A consumer may dispute a credit report error directly with the credit reporting agency. The credit reporting dispute will be based on issues in your Letter of Dispute of the Medical Bill, and that the provider has not responded adequately or at all to the letter.

Patient Fairness can help customers complete dispute forms for submission to Equifax, Experian or Trans-Union. Credit reporting disputes require such sensitive information as social security numbers and copies of proof of identification. Customers may wish to complete and submit a credit reporting dispute directly with an agency.