I’m a responsible credit card user. I pay my bills on time, never make large purchases on impulse, and have an emergency fund to provide extra cushion. I draw up budgets and stick to them (for the most part), and occasionally take a hard look at my household’s debts and assets to make sure we’re on the right track for the long term. In short, I’m a financial control freak.
But there are plenty of things I can’t control when it comes to my finances. The largest of these may be medical catastrophe. And I’m not just talking about a broken bone or a nasty flu. I fear the health problems that deal a deadly blow to your emergency fund, the chronic conditions that can max out your credit card limits, the medical emergency that could take me by surprise at any moment.
Cancer treatment, back surgery, heart problems…all of these and more put thousands of Americans into 5- or 6-digit debt. It just doesn’t seem fair that someone battling a serious health problem also must cope with a wrecked credit score and debt collectors knocking on the door.
The Medical Debt Relief Act of 2009
A new piece of legislation on the table in Washington, if passed, would lessen the impact of medical bills on our credit scores. Currently, unpaid medical debts are treated just like any other collection account: Even after being paid off, they continue to harm our credit scores for up to seven years. 12 representatives of Congress are spearheading the Medical Debt Relief Act which would put an end to this practice. If this amendment to the Fair Credit Reporting Act is passed, it would:
- Prohibit credit bureaus from including medical debts on a credit report more than 30 days after they’ve been paid off or settled
- Prohibit credit bureaus and other organizations from factoring paid off or settled medical debts into credit scores
The bill doesn’t provide any relief for your current medical bills; those debts will continue to affect your credit rating as they always have. But the Medical Debt Relief Act would ensure that once you’ve paid off or settled a medical debt, it would no longer continue to harm your ability to secure a good mortgage or other loan.
“Debt from medical expenses isn’t like buying a big screen television on a credit card, but it is being treated in exactly that way by the credit bureaus even when it is paid off. People shouldn’t have their credit worthiness suffer because they got sick or injured,” US Rep Mary Jo Kilroy says.