Medical Debt Might Not Appear on Your Credit Report

As many as 20 percent of the nation’s borrowers have one less reason to dispute their credit reports. A new law has just gone into effect that delays the reporting of unpaid medical bills by 180 days. That gives you six months to dispute errors on the bills and work with your medical insurance to process the claims.

If you’ve ever had large medical bills, you know that it can be a long and drawn-out process for the insurance company to process the claim, and you may need to go back and forth between your medical provider and the insurance agency several times before the payment is made. In the meantime, a collection agency reports your unpaid medical bills to the credit bureaus and your credit report takes a hit.

But not anymore. The new law comes out of a 2015 settlement between New York attorney general Eric Schneiderman and the three credit bureaus—Experian, Equifax, and TransUnion.

What Does the Waiting Period Mean for You?

In the past, your credit report could include any unpaid medical bills as soon as they went into collections—even if you were actively trying to resolve an issue with your medical provider or the insurance company. You weren’t a risk to creditors, but your credit report would make it appear as though you might be.

In fact, credit-scoring companies like FICO and VantageScore have known for years that medical debt isn’t a good predictor of credit risk. They have been adjusting their formulas to account for that fact. But not every credit bureau uses the latest formula, and medical debt could still impact a credit report. That’s why the new law is considered such a great advantage for consumers—it takes effect for every credit report, no matter what formula is used.

This change could affect as many as 20 percent of all Americans, since one out of five reports includes unpaid medical debt.

But after the 180-day waiting period expires, your credit report will include any unpaid medical debt—whether you’re still disputing an error or not. The waiting period is a much-needed buffer for patients, but it doesn’t provide an excuse not to pay legitimate bills. Likewise, if your medical bills have an error, or you have a dispute with your insurance company, you shouldn’t put off trying to resolve the issue.

What About Current Unpaid Medical Bills?

What if you already have an unpaid medical bill that’s less than 180 days old? If it was reported to the credit bureaus before the law went into effect on September 15, it will probably stay there. The new law doesn’t pertain to previously reported bills. However, once your insurer pays the medical debt, it will be removed from your credit report and will no longer influence your credit score.

This new law highlights the importance of checking your credit report on a regular basis. If you don’t see the appropriate changes taking effect, you can dispute your credit report and have the inaccurate information removed from your record.

If you discover any of these issues, contact one of our credit repair specialists. We can help you sort out your issues and file credit report dispute, if necessary.

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