The Biden administration is moving to ban medical debt from credit reports.
Vice President Kamala Harris said Tuesday that the proposed rule, taken through the Consumer Financial Protection Bureau, would reduce the number of Americans with medical debt listed on their credit reports to zero, down from 46 million in 2020.
In a press call Tuesday, Harris said the move would help improve the financial health and wellbeing of millions of Americans.
Medical debt, she said, “makes it more difficult to get by, much less get ahead. That is simply not fair.”
The administration calculates that if implemented, the rule would raise affected individuals’ credit scores by an average of 20 points, and could lead to the approval of approximately 22,000 additional mortgages every year as a result of the cleaned-up credit reports.
A recent study estimated that one in five U.S. households live with medical debt, including people with health insurance; and that on average, a typical American household owes about $4,600 in medical debts.
This is simply huge. I don’t know if the average person knows how much this is going to affect Americans. It will have a massive positive benefit. I mean so much of my life was a struggle because of medical debt on my credit report, that should never have been there in the first place by the way. I’m thrilled by this this is a great change.
My credit got tanked years ago for a $95 doctor visit bill I was disputing that got sent to collections. Took me years to repair my credit. I spent most of my twenties with credit well below 600 and unable to get even small increases to my credit.
I hope this goes through and others don’t have to deal with this kind of crap (or worse) because of the mess that is credit reporting.
Could you expand on why this makes such a big difference? I’m not very knowledgeable in this area. Is medical debt treated differently than other debts by lenders?
My first thought was that medical debt, like any other debt, has financial obligations that lenders would have to know about to determine the amount of credit a person is eligible for. Wouldn’t medical debt payments impact the amount of additional debt you can afford?
The significant difference is that medical debt in the US is not usually elective. I can choose to sign up for a credit card, or I can choose to apply for a house/car loan, or I can choose to go to college, or I can choose to start a business. Are you gonna choose to ignore going to the ER when you break your arm, or are having chest pains, or are airlifted after a drunk driver T-bones your car? Are you gonna refuse your child’s chemotherapy or dialysis treatments?
The US medical system is fucked up from top to bottom.
(Also note I’m not commenting on whether elective debt in the US is fair, only highlighting the difference between medical debt and other debts.)
It ends up on your credit report while you’re trying work it out between the hospital and the insurance company. Phone calls to one, phone calls to the other, and then, if you get it worked out, you have to file a claim with each credit reporting agency to get it removed. It’s like a full time job. And, once you get it cleared up with the hospital, you have to do the same with every medical person involved.
Ah, that makes a lot of sense. Thanks for explaining. I’ve been fortunate enough to avoid major medical expenses or debt, so I hadn’t thought of the situation you’ve described.
Someone correct me if I’m wrong, but similar to how you don’t need to disclose alimony when applying for a mortgage, it’s more on the type of debt. Yes it’s still debt at the end of the day and certainly impacts your ability to pay a loan, but most reasonable people and proponents of universal healthcare push for it to not be considered a factor when assessing one’s credit worthiness because of how destructive it is. Healthcare is something that cannot be avoided, unlike non-essential credit card debt from shopping for example.
I’m kinda rambling as I can’t really say exactly what I want to say, but hopefully someone who can explain it better can chime in.
It’s not as huge as some people think. All 3 credit bureaus stopped reporting unpaid medical debt with an initial balance under $500 as of July 1, 2022, which is 70% of medical debt (when you have $15,000 of debt that’s usually split 50 ways).
They also no longer report medical debt that has been paid - even if it is late. Additionally, debt collectors now have to wait a year to report you, giving you time to negotiate a more reasonable rate or have the debt discharged.
That’s not to say this isn’t good, but things have been improving massively on this front for the past few years. Reality is that with so much bullshit medical debt, the bureaus are going to have to either ignore it or nobody will be able to get a loan, which is worse for the banks than loaning out money to someone who had an unexpected 6-figure bill because their insurance sucks.
Just nationalize our healthcare system and cut out the middle man
You’re gonna need a Dem supermajority (plus a few, to offset any potential Lieberman) in both chambers of Congress for that. I wouldn’t hold my breath for it. In the meantime, this will have a tremendous impact for a lot of Americans, which is great!
I understand that. That’s why we need more progressive democrats running in local elections.
NC is making easier to be bought off.
More dems will not get us universal healthcare, every single one of them is owned by capital and they would never do a thing to harm profits.
Easy to say, but what will all those senators and government people do without their cuts??
I’m sure Republicans will be challenging this in court.
Does it help regular Americans? Then yes, yes they will
You mean the party of taking things away.
we’re #1 (in medical bankruptcy) go usa
Credit scores weren’t even a thing until 1987 and the world worked just fine without them.
… except for minorities in the United States.
Credit scores were literally invented right after the courts decided you couldn’t reject someone’s mortgage application just because they are black. Now interested of a “Whites Only” neighborhood, you just need a high credit score.
Except for the part where credit scores were specifically designed to keep minorities down.
My point wasn’t that credit scores work just fine now. My point was: for a lot of people, the world didn’t work just fine before credit scores.
Removed by mod
Hell yeah, this is great to see. Striking this off will help many people qualify for better loans on stuff like permanent housing.
Excellent, just in time for the next housing crash.
It’s a step in the right direction, at least. I’m hoping to one day see the same headline without the last three words.
I’ve had medical debt for years without it hitting my credit so I thought this was already passed?
I had heard that medical debt cannot effect your credit. Believe me it can. I had to have a malignant melanoma removed from my back. I put it off until it nearly killed me (quite literally, they told me it was 2mm from my bloodstream and would have killed me if it got there) so I could afford insurance before I got it looked at. I received two bills. My wife was in school and I was making 34k a year for both of us to live on.
For one bill they let me pay $50 a month. The other bill they wouldn’t accept anything less than $200 a month which was completely undoable for me. I told them they could get $50 a month from me or never see a penny. Two months later it was sold to a collection agency and immediately knocked my credit down by about 150 points. It went back up by that amount seven years later. They never got a cent.
Same here. Currently have a bunch of collections agencies calling me. Had to havey ankle put back together in November and I didn’t have the option to consolidate everything into one bill. I very quickly lost track of who the fuck I gotta pay at this point. I’m just going to pay them off one at a time until it’s gone. I can’t handle working with 10 different medical billing departments that work the same hours I do. I had to take an entire day off work when the bills first came in to get it figured out, and then a month later I got more for different things and I gave up. I just have a stack of bills that I’m going to be going through and paying what I can online then go from there. I’ve been actually trying to pay this shit, but idek what’s what. Life pro tip: don’t break your ankle as spectacularly as I did. It’s nothing but trouble
I was under that impression, too.
I appreciate the move but changing definitions of credit worthiness isn’t going to fix the problem.
It’s going to fix a lot of problems for a lot of people that need help. Don’t do that, don’t be so set in needing Perfection that you allow people to suffer in the meantime.
Eh, the post you’re replying to isn’t anywhere close to as cynical as it could have been.
Frankly, the most generous interpretation of why this policy was put forward is an implicit acknowledgement that the way the US healthcare industry currently operates is adversely impacting the personal economies of a huge segment of the population in a way that isn’t really justified. With just a slight bit of cynicism, in that they they mention how it could affect mortgage acceptance rates, there’s also an acknowledgement of the knock-on effects this is having on other segments of the broader economy, which is probably what they care more about. And with just touch more cynicism we could say this is a move to garner more votes in the upcoming election. Or all of those things can be true simultaneously.
The state of the US health insurance industry and the relationship private equity has to healthcare in general really needs a complete overhaul. To say that this is a bandaid solution (if even that) isn’t the same as saying that it won’t do any good, and therefore shouldn’t be implemented.
It isn’t cynacle to say the president is doing things to get votes. That’s the president’s job - to do things the populous wants. That’s what a representative democracy is. It’s good for the president to do things that people want him to do.
How does it help them? Won’t credit card companies punish everyone and just assume everyone has the average amount of medical debt (or even worse) rather than pretend medical debt doesn’t exist?
It’s an incremental fix that is doable with the current state of government.
Is it perfect? No. It’s not. But it at least helps some people.
You’re letting the perfect be the enemy of the good.
cReDiT wOrThInEsS
like getting sick and living in america makes you unworthy?
