Earlier this year, I took a six-block ride in an ambulance to the emergency room, where I was treated for a tremendously painful herniated disc. My back is better, thank you for asking, but my credit is not.
A pesky $37.50 bill to cover that ER trip got paid too late and still scars my credit score.
That is, unless Congress passes a bill that would require the credit bureaus to remove paid or settled medical debt up to $2,500 from Americans' credit reports within 45 days. While medical debt isn't typically reported unless the account has been turned over to collections, it can live on your credit history for up to seven years.
Supporters of the proposed legislation say the change would clear up credit problems for many Americans who have suffered an illness or accident for which they were financially unprepared. It would also remove data that many consumer advocates say is prone to errors, is often disputed and is a poor predictor of credit risk.
"This is a good bill," says Howard Dvorkin, founder of Consolidated Credit Counseling Services Inc. "Because it's so confusing for even trained professionals to figure out what's covered by insurance and what's not. And by the time you find out what is covered, the bill is at the collections agency."
A 2003 Federal Reserve study found that more than half of all accounts reported by collection agencies consisted of medical debt. Meanwhile, 72 million people said they had problems paying their medical bills or had accrued medical debt in 2007, according to a survey by The Commonwealth Fund.
The Consumer Data Industry Association, which represents credit reporting agencies, worries lenders could make less sound lending decisions if medical debt is omitted in credit reports. That, in turn, could lead to higher interest rates for consumers. The industry group also points out that many lenders do not consider any medical debt information in their underwriting.
This isn't the first time Congress has considered regulating how medical debt is reported. In the past two years, similar legislation has been proposed, but each time there wasn't enough backing.
For me, the bill would erase an afternoon of dumb luck. I left the payment on the checkout counter at a drug store. A nice man there said over the phone he'd mail it, but never did. Next thing I know, it's at collections and I'm a two-bit credit risk.
But more important, the bill could help many Americans cope with a medical catastrophe that morphed into a financial one -- making recovery less painful.
Do you think paid or settled medical debt should be quickly expunged from credit reports?