Help is coming for many people with medical debt on their credit reports.
Starting Friday, the three major U.S. credit reporting companies will stop counting paid medical debt on the reports that banks, potential landlords and others use to judge creditworthiness. The companies also will start giving people a year to resolve delinquent medical debt that has been sent to collections before reporting it — up from six months previously.
Next year, the companies also will stop counting unpaid medical debt under at least $500.
The companies say these moves will wipe out nearly 70% of the medical debt listed on consumer credit reports.
Patient advocates call that a huge advance. But they question whether medical debt should be on credit reports at all, given that many see it as a poor indicator of whether someone is trustworthy for a loan or rent.
"These aren't people who bought shoes they couldn't afford," said Amanda Dunker, of the nonprofit Community Service Society of New York. "They went to a doctor because they were sick or needed help with an injury."
Brooke Davis had about $1,300 in medical debt from a breast cancer scare that lingered for years on her credit report.
The 48-year-old McDonough, Georgia, resident said that made it difficult to rent an apartment, and she needed a co-signer for a car loan.
"You can't get anything, you can't even get a credit card if you have bad credit," she said.
The non-profit RIP Medical Debt relieved Davis's debt last fall. But more health problems and the loss of a job have pushed Davis back into debt. She's currently stuck with a swollen knee for which she can't see her doctor.
"I don't have the money to really go for my knee right now, so I've just been suffering with it," she said.
The federal Consumer Financial Protection Bureau has said its research shows mortgages and credit cards are better predictors than medical bills of whether someone will repay a debt.
The agency, which monitors banks, lenders and other financial institutions, has noted that people often don't have time to shop for the best price when they seek care and may have little control over the progress of a serious illness.
Medical billing errors can wind up on credit reports. And patients are sometimes unsure about what they owe or whether an insurer will eventually pay it.
The agency said earlier this year it estimates that 58% of the debt in collections and on credit records is from medical bills, and past-due medical debt is more prevalent among Black and Hispanic people.
The bureau is trying to determine whether unpaid medical bills should be included on credit reports.
John McNamara, an assistant director with the bureau, declined to estimate when the agency might make a decision. It could propose a rule, after hearing from all sides on the issue, that would end the practice.
Credit reporting companies also are considering whether medical debt should remain on the reports, said Justin Hakes, a vice president with the Consumer Data Industry Association.
The three national credit reporting agencies — Experian, Equifax and TransUnion — announced the medical debt changes in March, after the bureau said it would hold those companies accountable for the accuracy of their reports.
Patient advocates said those changes will help a lot of people.
The wait in reporting delinquent debt will give patients time to figure out how to resolve a bill, noted Chi Chi Wu, an attorney with the National Consumer Law Center.
"It gives more breathing room to deal with the insurance company or your provider," Wu said. "Everybody has a story about that."
Much of the medical debt that landed on Melina Oien's credit report several years ago was for bills that were under $500. The Tacoma, Washington, resident said she was living in an expensive place, Hawaii, where her former husband was stationed for the military. They were getting care for a daughter who had health issues that included a rare condition that affected her metabolism.
"We would zero out our checking account with living expenses every month," she said. "When you are counting out $5 for gas until the next payday, how do you pay a $30 bill?"
A severance package from the military eventually helped them pay their medical debt a few years ago. Oien said her credit score jumped about 70 points just from that.
But before that happened, they had to deal with higher interest rates on any loans they took out, and they could only get a mortgage after her sister gave them money to pay down some debt.
"It was embarrassing, it was very stressful," said Oien, who now works as a patient advocate.