Help is coming for many people with medical debt on their credit reports.
Starting Friday, the three major U.S. credit reporting companies will stop counting paid medical debt on the reports that banks, potential landlords and others use to judge creditworthiness. They will also give people one year to settle delinquent medical bills that have been reported to collection agencies before they report it, up from six months earlier.
Next year, the companies also will stop counting unpaid medical debt under at least $500.
The companies say these moves will wipe out nearly 70% of the medical debt listed on consumer credit reports.
Patient advocates call that a huge advance. They question the validity of putting medical debt on your credit report. Many see it as an indicator that someone’s reliability for renting or borrowing money. These are not people who could afford shoes,” Amanda Dunker of the non-profit Community Service Society of New York said. “They went to a doctor because they were sick or needed help with an injury.”
Brooke Davis had about $1,300 in medical debt from a breast cancer scare that lingered for years on her credit report.
The 48-year-old McDonough, Georgia, resident said that made it difficult to rent an apartment, and she needed a co-signer for a car loan. “You don’t have the ability to get any credit cards, and you won’t be able to get any loans if your credit is bad,” she stated.
The non-profit RIP Medical Debt relieved Davis’s debt last fall. Davis fell ill again and lost her job forced him back in debt. She’s currently stuck with a swollen knee for which she can’t see her doctor.
“I don’t have the money to really go for my knee right now, so I’ve just been suffering with it,” she said.
The federal Consumer Financial Protection Bureau has said its research shows mortgages and credit cards are better predictors than medical bills of whether someone will repay a debt.
The agency, which monitors banks, lenders and other financial institutions, has noted that people often don’t have time to shop for the best price when they seek care and may have little control over the progress of a serious illness.
Medical billing errors can wind up on credit reports. Patients are often unsure of what they owe and whether their insurer will pay them.
The agency said earlier this year it estimates that 58% of the debt in collections and on credit records is from medical bills, and past-due medical debt is more prevalent among Black and Hispanic people.
The bureau is trying to determine whether unpaid medical bills should be included on credit reports.
John McNamara is an assistant director at the bureau. He declined to give an estimate of when it might decide. After hearing all sides, it could make a proposal for a rule that would stop the practice.
Credit reporting companies also are considering whether medical debt should remain on the reports, said Justin Hakes, a vice president with the Consumer Data Industry Association.
The three national credit reporting agencies — Experian, Equifax and TransUnion — announced the medical debt changes in March, after the bureau said it would hold those companies accountable for the accuracy of their reports.
Patient advocates believe that these changes will benefit a large number of people.
The wait in reporting delinquent debt will give patients time to figure out how to resolve a bill, noted Chi Chi Wu, an attorney with the National Consumer Law Center.
“It gives more breathing room to deal with the insurance company or your provider,” Wu said. “Everybody has a story about that.”
Much of the medical debt that landed on Melina Oien’s credit report several years ago was for bills that were under $500. According to the Tacoma resident, Washington, she had been living in Hawaii with her ex-husband, who was serving as a military officer. They were getting care for a daughter who had health issues that included a rare condition that affected her metabolism.
“We would zero out our checking account with living expenses every month,” she said. “When you are counting out $5 for gas until the next payday, how do you pay a $30 bill?”
A severance package from the military eventually helped them pay their medical debt a few years ago. Oien stated that her credit score rose by 70 point after this.
Before that, Oien had to manage higher interest rates for any loans she took out and could only obtain a mortgage once her sister paid them some money.
” “It was embarrassing and it was very stressful,” Oien said. She now serves as patient advocate.
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