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How Your Credit Scores and Ability To Qualify For A New Loan Are Impacted By Medical Debt

Over 43 million Americans have full health insurance, yet medical bills are credit nightmare for millions of Americans despite this fact. The Consumer Financial Protection Bureau in Oklahoma City recently held a field hearing on medical debt collection. The reason they met was to discuss the medical debt collection practices as the entire medical billing system is fragmented due to lack of communication between consumers, medical providers, insurers, hospitals and debt collectors. Medical bills passing through so many hands can cause them to slip through the cracks in the system and result in errors that end up on a end consumers credit report.

Last year I had a bill for a routine doctor visit and resulting blood lab test and 2D echo cardiogram, the doctor bill was covered as was the lab work, the insurance agency never got the claim from the hospital where the 2D echo cardiogram was performed, then lo and behold 6 months later I found a nasty surprise on my credit report a rather large debt for the entire procedure and to make matters worse the account ended up in collections. Dealing with the collection agency, insurance agency and the hospital was a nightmare. It took me 4 months to get the matter resolved.

Some people give in and pay off the debt collector thinking their nightmares and credit problems will end there, only to find the debt collection agency never removed the debt from their credit report, which results in the need to contact them again and possibly the credit reporting agency to open a dispute. Some debt collectors will continue to post the debt to your credit report even after the debt as been paid in full. There are 43 Million Americans who supposedly have medical bills, and of those 15 million have zero problem paying their other bills.

The federal government is beginning to realize that it is not fair to damage someones credit report over medical bills when the system itself is broken. The Consumer Financial Protection Bureau is taking it’s first steps to help protect consumers from unfair medical debt collection practices and the resulting damage to their credit reports by require credit bureaus to monitor medical care providers that produce the most disputed bills. They will require credit bureaus to reject reject information from error-prone businesses, investigate the source of the disputes, identify any problems, and take any necessary actions on behalf of the consumer.

Fico itself agrees with all of this so it has unveiled it’s new scoring system called Fico 9. Fico 9 is designed to lower the impact of long overdue medical bills on consumers credit reports. It is now being tested by lenders for accuracy according to FICO scoring executive James Wehmann. The credit reporting agencies are starting to finally wake up and realize that much of the so called medical debt appearing on consumers credit reports is due to errors, mistakes and poor collection practices on the part of medical providers, although some medical debt is indeed legitimate. Consumers should see an adjustment on their credit reports sometime in 2015 when the FICO 9 changes take full effect if they have had past due medical debts appearing on their credit reports. It remains to be seen if lenders will raise the bar when it comes to credit score minimums to take into account the rising credit scores of millions of Americans, only time will tell.

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