Some Medical Debts Could Soon Be Expunged from Credit Reports

There seems to be widespread misunderstanding as to the impact that medical bills have on a consumer’s credit report but as it stands now, even those bills which were eventually paid in full do remain on the credit history for a full 7 years. This may or may not have an impact on a person’s creditworthiness since some lenders view these bills with greater or lesser weight. Even so, they are there and they do lower your credit score.

According to CNN Money, legislation which was recently proposed could erase old doctor bills from your credit report. The House Committee on Financial Services will eventually review the Medical Responsibility Act of 2011 which was proposed earlier in the year. In fact, the bipartisan Act may even come before the house as early as this fall, which is only weeks away.

One of the key benefits provided for in the Act would be the fact that medical bills would no longer be a factor in a consumer’s overall credit score. In fact, CNN’s report states that removing just one medical bill from a person’s credit report could improve his or her credit score by an amazing 50 points. This just might be enough of a boost to place that consumer in a better position to qualify for credit.

Part of the problem Americans now face is in direct relationship to the job market. Within just the past 2 years more than 57% of workers who became unemployed also lost medical insurance benefits. Now, without a job and medical insurance, they are forced to seek out emergency care or other medical services that don’t require an upfront payment. Unfortunately, without a job these consumers are also unable to pay those bills as they come in.

According to a recent study conducted by the Commonwealth Fund, 30 million adults in 2010 were contacted by credit collection agencies because they had unpaid medical bills. The study did however find that 44 million adults in America said they were actively trying to pay down those debts. In any case, once the debt is reported it will have a direct negative impact on your credit score as it now stands.

Unfortunately, there are opponents who feel that it is unwise to remove medical debt because this will portray creditworthiness when in fact that consumer is greatly in debt. While the amount of medical debt in question needs to be under $2,000, it is still an indication of that consumer’s ability and willingness to pay debts timely. This is a huge concern to the American Bankers Association.

The controversy is in the fact that some people really did fall on hard times while others had the ability to pay their medical bills and simply refrained from doing so. If enacted, this law would benefit both groups, which would be a travesty of justice, according to an ABA spokesperson. Further, all three of the major credit reporting agencies said that expunging medical debt would take away a lender’s predictive ability which is largely based on a consumer’s credit history.

It has been noted that most patients don’t leave their medical provider with the intention of not paying their bills but are sometimes either unable to do so or are unsure what is covered by their medical insurance. Some of the blame is being placed on insurance companies as their coverages and co-pays are difficult for the average consumer to understand, but in the end, the bottom line is that the responsibility still lies with the consumer.

In any case, it will be interesting to watch how this unfolds as the House debates the Act when it is brought before them this fall. Those who have unpaid medical bills on their credit reports would be well advised to follow this Act as it makes its way through the legislature.

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