Can Medical Debt Hurt Your Credit Record? What You Need To Know

There’s little question that healthcare providers have become more aggressive in collecting past-due bills. Although medical debt is still an issue hurting millions of Americans, there’s much you can do to protect yourself. Some 20% of Americans have some form of medical debt, so this is a widespread issue.

Sometimes the medical bills are relatively small, although many providers engage aggressive debt collection firms to call, text and harass people. I know because I was harangued by a hospital for a bill that hadn’t even been processed by my insurance company. The bill collecting firm even repeatedly called my daughter, who wasn’t even responsible for the bill. Bill collectors were threatening consumers by saying overdue debts will hurt their credit ratings.

The Consumer Financial Protection Bureau (CFPB) has studied this problem and launched a new set of rules to stem the abuses it found in a report.

“The credit reporting system should not be used to coerce people into paying medical bills that they do not owe,” said CFPB Director Rohit Chopra. “Our report analyzes recent changes announced by the Big Three credit reporting conglomerates, and it is clear that more work must be done to address medical debt credit reporting problems.”

Here’s what the CFPB found:

• Two-thirds of medical collections on credit reports will no longer be reported. Starting in 2023, medical collections tradelines less than $500 will no longer be reported on consumer credit reports. Medical bills under $500 are significantly more likely to remain on a credit report for longer than medical bills over $500. For patients and families who have only relatively small outstanding medical bills, the $500 threshold could mean a large reduction in coercive credit reporting.
• Certain groups will receive less relief. Although residents of lower income, majority Black or Hispanic census tracts are more likely to have medical collections tradelines on their credit reports than residents of high income and majority white census tracts, they are slightly less likely to benefit from the announced changes by having all their medical collections tradelines removed.
• The report finds the changes likely will result in the majority of individual medical collections tradelines being removed from credit reports. However, in terms of dollar amount, a large majority of reported medical collections likely will still remain. The report also highlights the characteristics of consumers with reported medical collections currently, and provides a state-by-state breakout of how the credit reporting changes will impact consumers’ credit reports.

How to Protect Yourself

You have a right to see your credit reports and correct any errors. You should do this at least once a year. You’re also entitled to see at least one credit report from all three agencies once a year:

• visit AnnualCreditReport.com
• call 1-877-322-8228, or
• complete the Annual Credit Report Request Form and mail it to:

Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

Keep in mind that you’re protected under the federal Fair Debt Collection Practices Act against abusive bill collectors. The Federal Trade Commission has more information. Know your rights.