Neither your mortgage nor your auto loan appear on your consumer credit report. But the hospital and doctor bills are there. And, my boy! can they hurt your credit score.
The Consumer Financial Protection Bureau (CFPB) recently released a report showing that 58% of debts sent for collection relate to medical bills. They were accumulated by 20 percent of the population. One in five people owe medical bills and this accounts for more than half of all consumer debt.
I found these numbers staggering, as did Rohit Chopra, director of the CFPB, who wants to do something about it.
Do not cancel debt or even offer discounts, but at least make this type of debt non-reportable to credit agencies. Like mortgages and auto loans, medical bills will always be due, but not paying them on time or in full won’t affect your credit score.
This is important because lenders often use the ratings to determine whether or not you qualify for a loan and what interest rate you will pay. Some employers still use them to screen applicants, and landlords may use them to decide whether or not to rent you an apartment.
“Having a medical debt collection mark on a credit report can make it harder to get credit, rent or buy a home, or find a job. Families are being pushed into bankruptcy by medical debts they cannot pay. Chopra said.
The report notes that blacks and Hispanics, as well as low-income adults and young adults, have higher rates of medical debt than the general population. This is not surprising, as these groups are also the least likely to have comprehensive health coverage.
In states that have not expanded Medicaid, even during the pandemic, the situation is truly dire. Sick people have incurred huge bills for care and many jobs, homes or both have been lost while in hospital and may never be able to get out of their financial hole.
Additionally, Chopra hinted that not all credit reports are accurate.
Most people have a hard time understanding hospital bills for what they are, but add collection agency fees and interest rates, and the numbers can become not just indecipherable but astronomical.
Chopra, appointed by President Biden in October, is able to do something about reporting medical debt, but he wants to investigate the situation further.
However, the opposition is already preparing.
Francis Creighton, president of the Consumer Data Industry Association, which represents credit bureaus, said banning medical debt from credit reports could backfire because potential lenders need the full picture. an applicant’s credit profile.
He said not all medical debt is the result of emergency procedures, but some are from elective procedures such as teeth whitening or cosmetic surgery. That’s probably true, but I guess it’s a pretty small percentage of overall medical debt.
There are now ways for a consumer to get help paying their medical bills.
Even when the debt gets so old that a doctor or hospital takes it to a collection agency, there are things the patient can do to reduce the amount. But it’s best to start early, once the bills start rolling in.
If the amount is more than you can afford, contact the biller immediately, request a rebate, and establish a repayment plan. Most providers simply receive a portion of the bill directly from the patient, instead of sending multiple notices and remitting collections to an agency that will take a significant portion of the payments received.
And while you pay even a little, nothing negative will show up on your credit report.
An old assemblya of Jersey City, Joan Quigley is president and CEO of North Hudson Community Action Corp.
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