What Is Medical Debt?
Medical debt is any unpaid balance that you owe to a healthcare provider, hospital, or medical facility. It can arise from a variety of reasons, such as an unexpected illness, hospitalization, or medical emergency. Medical debt can be particularly challenging to manage, as it often comes with unexpected costs, and it can be challenging to negotiate with healthcare providers or insurance companies.
The Impact of Medical Debt on Credit Scores
Medical debt is one of the leading causes of debt collection in the United States, with over 43 million Americans struggling to pay medical bills. Unfortunately, medical debt can have a significant impact on your credit score. Even a single medical bill can damage your credit score, making it challenging to get approved for credit or loans in the future.
Medical debt is often reported to credit bureaus, which means it will appear on your credit report. Your credit report is a record of your credit history, and it's used by lenders, employers, and other entities to assess your creditworthiness. When medical debt is reported to credit bureaus, it can stay on your credit report for up to seven years, even if you eventually pay it off.
The good news is that in July 2023, medical debt will be removed from credit reports, providing much-needed relief for those struggling to pay medical bills. Any medical collections less than $500 will no longer be reported on a borrower's credit report. Also, any paid medical collections, should of, been removed from a borrower's credit report beginning in July of 2022.
The Impact of Medical Debt on Your Finances
In addition to damaging your credit score, medical debt can also have a significant impact on your finances. Medical bills can add up quickly, especially if you need ongoing treatment or hospitalization. Medical debt can also lead to collections, which can result in wage garnishment or asset seizure.
Moreover, medical debt can also impact your ability to access healthcare. If you have outstanding medical bills, healthcare providers may refuse to provide you with further care until you have paid off your debt. This can be especially challenging for those with chronic or ongoing medical conditions that require regular treatment.
The Benefits of Removing Medical Debt from Credit Reports
Removing medical debt from credit reports is a significant step forward in helping those struggling with medical bills. Here are some of the benefits of removing medical debt from credit reports:
- Improved Credit Scores: Removing medical debt from credit reports will help to improve credit scores for millions of Americans. This can help to make it easier to access credit and loans in the future, which can be especially important for those with ongoing medical conditions.
- Better Access to Healthcare: By removing medical debt from credit reports, patients will be able to access healthcare without the fear of being turned away due to outstanding medical bills. This is especially important for those with chronic or ongoing medical conditions.
- Reduced Financial Stress: Medical debt can be a significant source of financial stress for many Americans. By removing medical debt from credit reports, patients will have one less thing to worry about, reducing overall financial stress.
Beginning in July of 2023, the removal of medical debt from a persons credit report can potentially have a dramatic effect on a persons FICO score and thus assist in getting home loans. 1st Choice Mortgage encourages all borrowers to consistantly check their credit report, online at www.annualcreditreport.com. This is the federally mandated service, and ensure that you are checking all 3 of the credit bureaus to ensure that the medical collection has been removed. If you have questions, please don't hesitate in calling 1st Choice Mortgage.