Should medical debt count against you?
Some in Congress think your medical debt shouldn't count in determining your creditworthiness.
A bill was recently introduced in the U.S. 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.
The three national credit bureaus -- Experian, TransUnion and Equifax -- currently regard medical bills like any other consumer debt. According to those sponsoring the legislation, that's not fair because 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.
"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 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 would do is amend the Fair Credit Reporting Act to prohibit credit-reporting agencies from using paid or settled medical debt in determining creditworthiness. In addition, reporting agencies would be required to delete medical debt from the consumer's credit history within 45 days (in the 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, D-Ohio:
- 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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