Side Effects of Injury: Medical Debts, Credit Reporting, and Credit Scores

Benjamin Franklin famously quipped that there are only two constants in life: death and taxes. He was only partially correct. Death and taxes are definitely constants, but so are credit scores. The world runs on credit, and credit runs on credit scores. When someone suffers a serious injury, they have a number of immediate concerns. They wonder what medical treatment they’ll need and how much it will cost, how much work they’ll miss, whether they should hire a lawyer and if so who, and many other things. Because of that, it’s not surprising that most injured people don’t spare a thought for how the accident and its aftermath might affect their credit score. But the reality is, even if paid in full by insurance or through the lawsuit, the medical debt incurred can be a major drag on the unfortunate person’s credit score.

There are three major credit reporting agencies: Experian, Equifax, and TransUnion. Creditors—banks, credit card companies, and, yes, even hospitals—report debts to these agencies. They, in turn, maintain credit reports on everyone in the country. The information contained in those reports are used to generate credit scores—a numerical representation of an individual’s creditworthiness. Contrary to popular belief, there are multiple ways to calculate a credit score. The most common are produced by FICO and VantageScore—but even these entities have produced multiple formulae. Even when credit scores are not used, different entities—insurance companies, banks, credit card companies, etc.—view certain types of information differently. The result is that the same medical bill can have wildly different effects on one’s creditworthiness depending on which entity you ask. To add to the menagerie of ways in which medical debt may be treated, medical providers can vary significantly in how long they wait to report those debts to credit reporting agencies. The bottom line: even the most responsible person can have a credit report scuttled by large medical debt, and it can be difficult to know when that debt will even show up on one’s credit report.

Fortunately, as of September 2017, the major credit reporting agencies are changing how they deal with medical debt. They will roll out a new policy that keeps medical debt off credit reports for 180 days. That six month period is designed to give patients the opportunity to resolve payment disputes with providers and insurance companies—and personal injury defendants. More importantly, it provides some much-needed uniformity. Starting in September, patients can be confident that their medical debts will not show up on their credit reports for at least six months.

But that doesn’t resolve all of the problems with medical debt and credit reports. It is still treated very differently depending on which scoring model is used or which entity is reviewing the credit report. That means it is all the more important for someone who has been injured to contact an experienced personal injury attorney right away. That attorney will be able to help you ensure that you recover for your injuries and put you in the best possible position to have medical debts paid off before that six month period elapses.

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