Should Medical Debt Count Against You?

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A bill was recently introduced in the Senate that would prevent paid or settled medical debt from negatively impacting your credit score. The bill is a companion to one introduced last year in the House, The Medical Debt Relief Act.

Today the three national credit bureaus – Experian, TransUnion and Equifax – regard medical bills like any other consumer debt. According to those sponsoring the legislation, that’s not fair since medical debt isn’t in the same category as other consumer debt and thus shouldn’t be equally weighted by credit reporting agencies when determining a consumer’s credit score.

Unlike other types of consumer spending, medical debt often results from causes beyond the control of those incurring it – nobody asks to get cancer. In addition, by the time a medical bill works its way through an insurance company’s payment system, gets declined and becomes the responsibility of the consumer, it’s often delinquent and turned over to a collection agency. So a consumer’s credit score could be negatively impacted before they even know they’re responsible for the bill or have the opportunity to pay it.

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“It’s already incredibly difficult for families to pay off the high cost of medical treatments for serious injuries and diseases,” said Sen. Jeff Merkley, D-Ore., one of several senators who introduced the Senate bill. “To add insult to injury, after families pay off their exorbitant medical debt, they continue to take a hit on their credit scores. This bill will give families a fair deal and ensure that their future financial transactions won’t be negatively affected by a bad credit score just because of past medical debt.”

What the proposed legislation will do is amend the Fair Credit Reporting Act to prohibit credit reporting agencies from using paid or settled medical debt in determining credit worthiness. In addition, reporting agencies will be required to delete medical debt from the consumer’s credit history within 45 days (Senate version: House version is 30 days) from the day it is paid off or settled.

More statistics regarding medical debt from the website of the bill’s House sponsor, U.S. Rep. Mary Jo Kilroy (OH)

  • Medical bill problems or accrued medical debt affect roughly 72 million working-age adults in America.
  • Over 28 million Americans were harassed by debt collectors in 2007 because of health care bills.
  • 60% of those with medical bills and debts were insured at the time they assumed health care debt.
  • According to mortgage originators and services, even one negative medical collection mark on a credit score can drop a consumer from Tier 1 to Tier 2 of the credit rating system which could cost consumers thousands of dollars in percentage points and closing premiums.

Do you think this bill should become law, or do you think medical debt should be weighted equally with other consumer debt in determining a credit score?

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Comments & discussion

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  • Dave

    I support this bill. I pay all my bill except for medical bills they all went to collections, my medical cost is 100+ per month.. I owe 70,000+. The Medical bills killed my credit, my score is 600. I pay high percent on my car loan because of my medical bills. Please get this passed

  • Ed Boyd

    As a mortgage broker for over 30 years, I don't think that bad medical bills should count against one's scores. I'll give you a classic example that I see all the time! A person works for say Boeing, who has excellent medical dental insurace. They go the dentist or doctor and walks out, thinking that the insurance is going to cover it. It comes up short, say $50! The doctor's clerks don't do anything about it most of the time. So that $5o sits there until a 3rd party financial clerk picks it off the doctor's computer and sends it to collection. There's a ding on your credit over nothing. If one screams at the airhead clerks in the doctors office, they eventually might get it cleaned up but that is like telling the jury to disregad that statement! I see it all too many times…just plain slop, especially in the medical fields. Ed Boyd Washington State

  • Mike

    I agree completely Ed. And it appears to me that you and I are the only ones in the world that see it this way. Insurance companies gain from you having a bad credit report and so do the banks. Because of this that you have just described i have average credit. I pay more for insurance, mortgage, etc and all because the hospitol couldn't bill me, but no one would ever believe it. I have never been late on a mortgage payment, car paymet, i only have one credit card it has less than 10% of it's limit etc. I earn a very good wage and i only have average credit.

    I wonder if there is something that they gain by turning these over to collections rather than just accepting the payment???