By TOM MURPHY, AP Health Writer
Help is coming for many people with medical debt on their credit reports.
Starting Friday, the three major US credit reporting companies will stop counting paid medical debts in reports that banks, prospective homeowners and others use to judge creditworthiness. The companies will also start giving people one year to resolve delinquent medical debt that was sent to collections before reporting it, up from six months prior.
Next year, companies will also stop accounting for unpaid medical debt below $500 or more.
The companies say these moves will eliminate nearly 70% of medical debt listed on consumer credit reports.
Patient advocates call that a breakthrough. But they question whether medical debt should show up on credit reports, since many see it as a poor indicator of whether someone is trustworthy for a loan or rent.
“These are not 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 on her credit report for years.
The 48-year-old McDonough, Ga., resident said that made renting an apartment difficult and that 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,” he said.
RIP Medical Debt, a nonprofit organization, relieved Davis of debt last fall. But more health problems and the loss of a job have pushed Davis back into debt. She currently has a swollen knee that she can’t see her doctor for.
“I don’t have the money to really go for my knee right now, so I’ve been struggling with it,” he 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 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 around for the best price when seeking care and may have little control over the progress of a serious illness.
Medical billing errors can end up on credit reports. And patients are sometimes unsure what they owe or whether an insurer will eventually pay.
The agency said earlier this year that it estimates that 58% of debt in collections and on credit records comes from medical bills, and overdue medical debt is more prevalent among Black and Hispanic people.
The bureau is trying to determine if unpaid medical bills should be included on credit reports.
John McNamara, deputy director of the office, declined to estimate when the agency might make a decision. He could propose a rule, after hearing from all sides on the issue, that would end the practice.
Credit reporting companies are also considering whether medical debt should remain on the reports, said Justin Hakes, vice president of the Consumer Data Industry Association.
The three national credit reporting agencies, Experian, Equifax and TransUnion, announced the changes to medical debt in March, after the bureau said it would hold those companies accountable for the accuracy of their reports.
Patient advocates said those changes will help a lot of people.
Waiting to report delinquent debt will give patients time to figure out how to resolve a bill, said 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. “Everyone has a story about that.”
Much of the medical debt that landed on Melina Oien’s credit report several years ago was for bills under $500. The Tacoma, Wash., resident said she lived in an expensive place, Hawaii, where her ex-husband was stationed for the military. They were receiving care for a daughter who had health problems that included a rare condition that affected her metabolism.
“We would zero out our checking account with living expenses every month,” he said. “When you’re counting down $5 for gas until your next payday, how do you pay a $30 bill?”
A severance package from the military finally helped them pay off their medical debt a few years ago. Oien said his credit score jumped about 70 points just because of that.
But before that happened, they had to deal with higher interest rates on the loans they took out, and were only able to get a mortgage after their sister gave them money to pay off some debts.
“It was embarrassing, it was very stressful,” said Oien, who now works as a patient advocate.
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