Some Medical Debt Is Being Removed From U.S. Credit Reports
Many people who have medical debts on their credit reports will be helped.
The three largest U.S. credit report companies will cease counting any paid medical debt in the credit reports used by potential landlords, banks and other credit agencies to assess creditworthiness. The companies also will start giving people a year to resolve delinquent medical debt that has been sent to collections before reporting it — up from six months previously.
The companies will also stop counting medical debts that are not paid in full by next year.
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These companies claim that these actions will erase nearly 70% of medical debts listed in consumer credit reports.
Patients advocates consider that an enormous advance. They question why medical debt should appear on credit reports. Credit scores are often viewed as poor indicators of a person’s ability to repay a loan.
“These aren’t people who bought shoes they couldn’t afford,” said Amanda Dunker, of the nonprofit Community Service Society of New York. “They went to a doctor because they were sick or needed help with an injury.”
Brooke Davis owed $1,300 to medical bills resulting from her breast cancer scare. This debt lingers for many years on Brooke’s credit reports.
McDonough resident, 48, said it was difficult for her to rent an apartment and that she required a cosigner in order to get a car loan.
“You can’t get anything, you can’t even get a credit card if you have bad credit,” she said.
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.
Federal Consumer Financial Protection Bureau claims that credit cards and mortgages can be used to predict whether someone will pay off 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.
Credit reports can be affected by medical billing mistakes. Patients are often unsure of what they owe and whether their insurer will pay them.
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An agency estimate that 58% debt on credit files and in collections is medical debt. Hispanic and Black people are more likely to have past due medical debt.
It is trying to decide if it should include unpaid medical expenses on credit reports.
John McNamara was an assistant bureau director and declined to provide an estimation of the time frame when the agency could make a decision. The bureau could issue a ruling, following hearings from all parties on the matter, to end this practice.
Justin Hakes from the Consumer Data Industry Association, vice president, stated that credit reporting companies are also considering whether to include medical debt on their reports.
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.
These changes, according to patient advocates, will benefit many people.
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Chi Chi Wu of the National Consumer Law Center stated that patients will have time to work out how to solve a debt if they wait to report it.
“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. The couple were taking care of a daughter with health problems, including a rare condition that altered 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?”
They were eventually able to pay off their medical debt by receiving a severance payment from the military. Oien claims that Oien’s credit score has risen by 70 points since then.
They had to live with high interest rates for any loans that they borrowed. And they were unable to get a mortgage until her sister paid them some money to repay their debt.
“It was embarrassing, it was very stressful,” said Oien, who now works as a patient advocate.
The Associated Press Health and Science Department receives support from the Howard Hughes Medical Institute’s Department of Science Education. All content is the sole responsibility of the Associated Press.
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