Proposed Law Would Remove Medical Debt from Credit Reports
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Proposed Law Would Remove Medical Debt From Credit Reports

August 12, 2011

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A bill currently before the House Financial Services Committee would change the way medical debts are reported to credit reporting agencies, according to GovTrack.us, a site that follows legislative action in Congress.

The bill, called the Medical Debt Responsibility Act of 2011, seeks to lessen the negative effect that medical debts can have on a person’s credit rating.

Currently, medical debts can have a severely negative impact on a person’s credit score:

  • Most non-retired Americans with health insurance get that insurance through their employer. In times of high unemployment (like right now), millions of Americans go without insurance or without adequate insurance to cover their medical needs.
  • Negative credit information remains on a credit report for seven years. That means that any medical bill that goes to collections will show up on a person’s credit report for nearly a decade, even if it’s later settled or paid.
  • Credit score determines eligibility for most loans. The majority of mainstream lenders in the U.S. (including mortgage lenders, car lenders, credit card issuers, etc.) consider a person’s credit score before making an offer of credit. Negative information like unpaid debts or debts in collections lower a credit score, making individuals less likely to qualify for loans or loans with attractive terms.

Proposed Changes: Remove Paid Debts from Report

If the bill (sponsored by North Carolina Democrat Heath Schumer) makes it into law, medical debts of up to $2,500 that are sent to collections but later paid off would be removed from a consumer’s credit report within 45 days of repayment.

But those with medical debts dragging down their credit scores shouldn’t rejoice just yet: the bill is still in the early stages of the legislative process. After reviewing the bill’s terms, the House Financial Services Committee’s members will decide whether to put the bill to a vote before the entire House, send it to the Senate or kill it.

And the bill provides no actual relief for those struggling with medical debt, even though bankruptcy filers consistently rank medical bills as one of the factors that pushed them to file for bankruptcy.


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