The Biden administration recently asked the Consumer Finance Protection Bureau (CFBP) to amend the Fair Credit Act, dealing primarily with medical collection accounts. Of course, social media went wild with a bit of fact and a lot of speculation. Here’s the real scoop. Starting July 2022, all paid medical collections under $500 will be removed from your credit history. Starting June 2023, all unpaid medical collections under $500 will be removed from your credit report. Also from July 2022, it will take 12 months (from the date of medical service) before a medical collection account can appear on your credit file. These changes are huge and it’s getting better.
If you are in the market for a home or automobile purchase, I highly recommend monitoring your credit history via “annualcreditreport.com”. This site offered you once a year a free credit report from the three credit repositories (Equifax, Experian and TransUnion). Until the end of 2022, you can request your free credit reports once a week.
I also strongly recommend that you download the Credit Karma app to monitor your credit profile and be on the lookout for any identity theft and credit fraud. Credit Karma allows you to dispute possible overrides (late payments, collection accounts, etc.) with two of the credit repositories (Equifax and TransUnion) online or via your smartphone.
You can register directly with all three credit repositories (Equifax.com, Experian.com, and TransUnion.com) online to monitor your credit history and dispute any derogatory items that appear on your various credit reports. They will try to trick you into paying for premium credit service. Simply decline and keep your free credit monitoring service. Challenging your late credit is called “throwing spaghetti against the wall.” By law, each credit repository must communicate the result of its investigation to you within 30 days. The best that can happen is that you delete a derogatory element. The worst that can happen is nothing.
But here’s the trick: dispute overdues or collection accounts every 31 days. According to federal law, credit reference agencies have 30 days to communicate the results of their investigations to you in writing. For low amount medical collection accounts, they don’t want to spend the manpower (money) to investigate these disputes every 31 days and many of these collection accounts will file your credit history. Once this happens, your FICO credit scores increase instantly.
Do you know what SOL stands for? Under the Fair Credit Act, any written contract of debt (loan) is valid for four years from the date of service or the date of the last payment, whichever comes first. After four years, the debt is considered “barred” or uncollectible because it exceeds the California statute of limitations (SOL) four years and a collection agency cannot collect that debt. If a collection agency is trying to collect a debt beyond four years, ask them to send you a bill. You can then sue them in small claims court and you’ll win $1,000 per debt.
Always have a collection agency validate the debt, especially if it is a medical collection account.
What was the date of service of each invoice?
What was the specific service for this bill?
Who was the original service provider?
What was the total amount billed?
How much did my health insurance pay?
If they don’t validate your debt in writing within 30 days, you can sue them in small claims court to remove the collection account and demand $1,000 per debt.
I can’t stress enough that if you pay off an old debt – even $1 – it restarts the clock for them to cash in on you for another four years. Instead, you might want to “Set to Delete”. Offer to pay a settlement (part of the debt) only if the creditor agrees in writing (signed and dated letter on their letterhead) to remove the debt from your credit history. Why would you allow a $45 medical collection account to lower your FICO scores when paying and deleting a collection account can increase your FICO scores by 40 points?
While overrides (late payments) can stay on your credit report for seven years, there are four debts that follow you for life: tax liens, child support, court costs, and student loans. These four debts do not disappear. By taking control of your credit history, you can get lower mortgage and auto loan rates, and premium credit cards will give you free trips.
Matthew Owen resides in Eureka and believes the First Amendment allows for free speech.