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Medical Debt and Your FICO Score


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October 01, 2023

Recently, there have been changes in legislation, proposed changes and overall consumer credit trends concerning medical debt and its impact on FICO scores. In this blog, we will explore these changes and their implications for your financial well-being. When it comes to your personal finance, staying informed about legislative changes is crucial for making sound financial decisions.

The Impact of Medical Debt on FICO Scores

To fully comprehend the significance of the new legislation, let's first review the traditional relationship between medical debt and FICO scores:

Medical debt has historically been treated like any other form of debt on your credit report. Unpaid medical bills could lower your credit score, potentially making it more challenging to secure loans or obtain favorable interest rates. Many consumers find themselves facing financial strain due to medical debt-related credit score impacts.

Changes in Legislation

Nearly 1-in-5 households in the United States has reported having some form of overdue medical debt. Patients are contacted by debt collectors about medical bills more than any other type of debt and in 2021, 43 million people had allegedly unpaid medical bills on their credit reports. 1

At the start of 2022, Congress passed the No Surprises Act with the goal of protecting Americans from certain unexpected medical bills. Joint measures between the three major credit bureaus - Equifax, Experian, and TransUnion - removed all paid medical debts and medical debts less than a year old from credit reports. As of April 2023, they have taken steps to remove all medical collections under $500.

In the most recent announcement of changes to legislation, the current administration is taking steps to remove medical debt completely from consumer credit reports, so the Consumer Financial Protection Bureau has outlined its proposed rules to keep all unpaid medical bills from affecting patient's credit scores.

How to Navigate the Changes and What it Means for You

Navigating these changes could be key when looking at optimizing your financial well-being. Here are some important tips when dealing with medical bills and your FICO score:

  • Review Your Credit Report: Regularly monitor your credit report to ensure that it accurately reflects any new legislation's impact on your FICO score. You have the right to request one free copy of your credit report each year from each of the three major consumer reporting companies and you may also be able to view free reports more frequently online.2 If you believe that a debt has been listed on your credit report mistakenly, contact the medical provider or collection agency first.
  • Know Your Coverage: Contact your health insurance company and follow up to make sure the company is paying costs it has agreed to cover. If possible, prepare for medical procedures in advance by finding out what your insurance will cover and what costs are your responsibility.
  • Negotiate with Your Health Provider: If you receive a medical bill, make sure to carefully review it and, if necessary, negotiate with healthcare providers or insurance companies to resolve any discrepancies. If you can't afford to pay a bill, try to work with your medical provider to reduce the amount owed or set up a payment plan.

In the ever-evolving world of medical and financial legislation, staying informed on changes is essential, as they can significantly impact your financial well-being. By understanding these new rules and how to navigate them, you can make informed decisions to secure a brighter financial future. At oXYGen Financial, helping you breathe easier® about your wealth (and health!) is our mission.

1 https://www.consumerfinance.gov/about-us/blog/medical-debt-anything-already-paid-or-under-500-should-no-longer-be-on-your-credit-report/

2 https://www.consumerfinance.gov/ask-cfpb/how-do-i-get-a-free-copy-of-my-credit-reports-en-5/#:~:text=You%20have%20the%20right%20to,free%20reports%20more%20frequently%20online.

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Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.

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The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

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Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice. https://Bit.ly/KF-Disclosures

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