A long list of unpaid medical bills have left many Americans with bad credit. Recent reforms in this matter on how this will be reported to credit bureaus will not change matters on the ground. Beginning September 15, a waiting period of 180 days will be applicable prior to unpaid debts appearing in the person's credit report. Moreover, credit reports will not include medical connections if health insurers paid the expenses.
Not helping the needy
These new standards were agreed by all three credit agencies- TransUnion, Equifax, and Experian. This consent was a component of two settlements made with the state attorneys general. The deal was made in 2015 and it was expressly crafted to assist individuals whose bills suffered due to cracks between existing companies and healthcare providers. The problem is that these changes will not help individuals who are unable to pay bills. People who are tired of waiting for insurers to pay up and thus pay the bill themselves will also not benefit from such actions.
The stakes are quite high in these cases. One collection on a paid or an unpaid credit report could lead to drop of a 680 FICO score. This could go down by about 40 points. A 780 score could go down by 100 points. Lower credit scores bring with them a number of problems. Credit will be harder to receive and if the person gets them, will be expensive. It will increase homeowners' insurance and automobile premiums. Deposits needed for utilities will be increased. It will also be difficult for a person to rent an appointment.
Advantage of a few
These changes, however, will help a few. According to an analysis made by data scientists working for FICO, only 200,000 individuals or 0.1 percent of 220 million individuals possessing a credit report, may gain from the reporting delay of six months. According to Ethan Dornhelm of FICO, impact will not be substantial due to such policies.
The big reason for such minimal impact is as the waiting period concretizes what is already being followed. Collectors are hired by medical providers to contact patients. This is done even if the bill payment is overdue by even a day. These debts, however, does not get reported to credit bureaus prior to 180 days of default. Many lawmakers have argued that medical bills are different from other kinds of bills. These must not have identical impact on the scores.