FICO has said that how a person repays their medical debt will predict, at least in part, how they will handle their finances.
FICO and other credit scoring formulas will drop your score if you have medical bills that have gone to a debt collection agency. It doesn’t matter if the medical debt was due to a trip to the emergency room after your son broke his arm, or a round of chemotherapy treatments. These medical collection accounts can ruin your credit by remaining on your credit report for up to seven years, even if you pay them back in full.
Luckily, there are people out there who feel that we shouldn’t be denied access to quality loans, a new mortgage, or decent credit simply because medical emergencies temporarily blew our finances off course. Enter Rodney Anderson, a major Dallas-based mortgage lender who doesn’t think medical debt should hurt your credit score in the same way that other types of unpaid debt do. Unlike a FICO score, Anderson believes that medical debt should be an exception to the rule in assessing your financial responsibility, because it blindsides almost all of its victims.
Anderson is a driving force and huge supporter of a government bill that aims to remove medical collection accounts from credit reports once paid in full. If passed, the Medical Debt Relief Act will result in an instant improvement to the credit scores of millions of Americans.
Where did the Medical Debt Relief Act come from?
About a year ago, an elderly couple came into Anderson’s office in search of a reasonable mortgage. He was disturbed that they didn’t qualify for the best rates available due to a small medical collection on their credit report accumulated after a three-week stay in the hospital. Anderson became curious as to how many others were affected by this issue and set out to learn exactly what percentage of his clients were paying higher interest rates solely because of credit-damaging medical debt. The numbers were so astounding that he realized someone needed to take action on this issue.
A win-win-win
Anderson has no desire to be in politics, but is a reminder that even just one person with an idea can make large scale improvements for an entire nation. He feels strongly that the Medical Debt Relief Bill is a win-win situation for all.
Currently, a medical collection account will likely remain on the debtor’s credit report for seven years, even if the debt is paid. This damages the debtor’s credit score, which in turn makes it hard to qualify for credit cards, mortgages, and other loans. By eliminating a medical collection account from a credit report once it’s paid, consumers can move on with their lives with cleaner credit history (that’s Win #1). In addition, medical providers are likely to collect more payments, assuming more people will pay up once they know the account will drop from their credit history (Win #2). Plus, the government will get tax money from people purchasing more due to their newly increased credit score (Win #3).
Anderson estimates a boost in the economy of $50 to100 billion in the first year alone after the bill passes.
The battle for H.R. 3421
Anderson is serious about making this legislation a reality. Mary Jo Kilroy, Representative from Ohio, took notice of the severity of the issue and quickly supported the bill. From there, it gained 44 co-sponsors after Kilroy introduced the bill in the house on July 30th. It has even yielded bipartisan support with the addition of Congressman Don Manzullo in late summer.
Other supporters include John Conyers of Michigan (the Chairman of the House Judiciary), Nydia Velazquez of New York (the Chairman of the Small Business Committee), and Steve Cohen of Tennessee (the Chairman of the Subcommittee on Commercial and Administrative Law). Mark Rukavina from the Access Project and Pam Banks of the Policy Counsel for Consumers Union are also major supporters of H.R. 3421.
The hearing for the Medical Debt Relief Act is set for November. Rodney Anderson will testify in front of the sub-committee for Financial Services and Credit Reporting.
If you’re interested in learning more about the bill or showing your support, visit OpenCongress or write to your Congress person. Rodney Anderson is also collecting petition signatures on his website.
