On Your Side: Medical debt and your credit report
If you have medical debt, keep an eye on your credit report. A new federal law is bringing relief to some Americans whose credit was negatively impacted by medical bills. On Your Side's Kristine Lazar explains how it works.
A poll by the Kaiser Family Foundation found that in the past five years, More than half of all American adults have gone into debt because of medical and dental bills.
But a series of new federal consumer protections could have your credit score going up if it's been bogged down by medical debt.
One in three adults in the U.S. has medical debt.
Mary Lou Sandler is one of them. Back in 2020, she cut her hand in the kitchen and had to go to the emergency room.
"I actually just found the bill. It was $900. And then when I went to collections, it was $2,700," said Sandler.
For years, that bill has sat on Sandler's credit report -- until last month, when it was wiped off.
"And my credit went up 41 points," said Sandler.
Last year, President Biden introduced a series of medical reforms to help ease the burden of medical debt. The first phase kicked in last summer, any medical debt that was paid off was removed by the three major credit bureaus.
The second phase began last month. Those same credit bureaus have agreed to wipe any unpaid debt less than $500. The majority of medical debt in America is for bills under that threshold.
"This is critical because black marks on your credit report, even for paid medical bills, prevent people from getting loans, renting apartments, buying a car -- critical things that we need to do for our lives," said Consumer Watchdog Litigation Director Jerry Flanagan.
A report by the Consumer Financial Protection Bureau found that in 2022, 43 million people had medical debt on their credit report, totaling around $88 billion. That same report found that patients frequently don't know what services will be performed and how much they'll cost.
"We spend $1.5 trillion in the United States -- federal dollars, your tax dollars -- on healthcare, paying hospitals and doctors to provide healthcare," said Flanagan. "And what do they do in return? They often sue you to collect the debt that you couldn't afford in the first place."
Also under these new regulations, you now have a full year before your debt can go to on your credit report after being sent to collections -- that's up from six months.