MEDICAL DEBT NO LONGER A CREDIT REPORT PAIN in California

Whether you’ve ever laughed or grimaced at the saying, congrats your credit score has improved to poor, then a low credit rating might be hitting a little close to home. If you’re one of the millions of Californians suffering from poor credit due to unpaid medical bills, you’re in for some good news. A state law has gone into effect January 1, 2025 which prohibits health providers and debt collectors from reporting medical debt to credit agencies. While the new law does not forgive the debt it should help your credit standing.

Often times medical debt can drag down an otherwise decent credit score. Anyone who’s spent time in the hospital or even just been examined and released the same day knows how easy it is to run up thousands of dollars in bills. There’s a doctor charge, the actual hospital charge, equipment and medication charges…and they’re not giving you the costs before you check out. This isn’t a restaurant where you can see the cost before ordering the meal. Sometimes we don’t seek medical attention because we’re worried we won’t be able to pay off a high debt. And it’s worrisome how a low score could effect your interest rates on loans, making it difficult to qualify for an apartment or home or even making it tough to get a job.

The law’s author, California State Senator Monique Simon believes people don’t choose to have a medical emergency or illness so this type of debt should not count against them. Supporters also believe medical debt is more prone to inaccuracies because of billing mistakes by health providers and insurers. Also under this new law patients can sue a medical provider or debt collector if they report the debt to a credit bureau like Experian, TransUnion or Equifax.

The national average for a medical debt is $3,100. More than a third of Californians carry some type of medical debt and that figure rises for low-income residents. Sometimes people don’t seek medical attention because they’re worried they won’t be able to pay off a high debt.One important note of the new law is that patients can only take advantage of it if the debt is owed directly to a medical provider or collection agency, but not when the debt is charged on a medical credit card or a general credit card.

President Biden has put forward legislation that would have a similar effect on the federal level but no word yet whether that will be carried out by the Trump administration.