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. 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.
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. But they question whether medical debt should be on credit reports at all, given that many see it as a poor indicator of whether someone is trustworthy for a loan or rent.
“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 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 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. But more health problems and the loss of a job have pushed Davis back into 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. And patients are sometimes unsure about what they owe or whether an insurer will eventually pay it.
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.
