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.
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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.
If you would like to receive more information on making smart money moves for your future, be sure to contact us today!
