Should Medical Debts Show Up on a Credit Report?
In recent weeks, the U.S. House of Representatives passed a piece of legislation that would require credit reporting bureaus to remove medical debts from consumers’ credit reports if those debts were paid or settled more than 45 days before the release of the report.
If the Senate passes a similar bill, this could mean good news for millions of Americans who have seen their credit rating suffer because of medical bills they were unable to pay.
Medical Bills & Bankruptcy
Sources note that, in recent years, medical debt has ranked as the most common contributing factor to personal bankruptcy filings in the U.S. And, according to insiders, that’s partly because of the following reasons.
- Unclear medical billing techniques: As you’ve probably noticed, most medical care facilities don’t send you out the door with a bill for their services – instead, the bill comes weeks or sometimes months later, and you have to sift through it to figure out what you were charged for.
- Limited or absent medical insurance: As recent debates over healthcare reform reminded us, millions of Americans don’t have adequate medical insurance, meaning that even relatively minor procedures can have severe financial consequences for the uninsured.
- Persistently high unemployment: Because health coverage in this country is generally linked to employment, the currently high unemployment rate means that more Americans than ever are uninsured or underinsured. Expensive medical bills, coupled with limited income, often mean serious financial distress.
Medical Bills & Credit Reporting
So what would be the benefit of removing paid or settled medical debts from credit reports?
- Improved credit: With fewer negative actions on a credit report, more Americans would qualify for more attractive loan terms (like lower interest rates). This, in turn, would set the stage for people acquiring less debt overall and perhaps mean fewer people would need to seek bankruptcy protection.
- Improved incentives to pay: Knowing that paying or settling medical debts could have a seriously positive impact on their credit scores could push more consumers to negotiate payments on medical bills. The long-term benefits associated with an improved credit score might provide the motivation to work through confusing language and overwhelming bill totals.
Medical Bankruptcy
The Senate’s action on this bill could play an important role on the finances and credit health of millions of Americans. According to one study, as many as 40 percent of Americans have medical collections on their credit reports – and such information is harming their overall credit health.
If you’re worried about medical debts or think you may need bankruptcy protection to address your financial concerns, take action now by connecting with a bankruptcy lawyer for a free consultation.
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