[T]hese days a credit score can make a major difference in whether you get a job, a new car, or a home of your own. Not to mention all the other facets of your life that could hinge on your credit rating or lack thereof. People are using credit scores to decide whether to rent you an apartment or charge you a hefty deposit for cell phone service. Growing numbers of people are judging potential romantic partners by their credit scores. Generally, credit ratings are unfair especially when the scores are damaged by unpaid medical bills.
Lawmakers have been trying to pass the Medical Debt Responsibility Act in response to the almost epidemic problem of unpaid healthcare costs damaging people’s credit reports. If you do not pay a doctor or hospital as promised, the provider usually turns the account over to a collection agency. Generally, the collection agency’s representatives place a derogatory entry on your credit report as a way to try to garner financial payment from you. But the catch is that whether paid or unpaid, any type of collection account is extremely damaging to your credit score for 7 years. Even if you ultimately file bankruptcy on that debt, your credit report is still damaged as a result of healthcare costs that were at least temporarily insurmountable.
Obviously some people have poor credit ratings because of sheer irresponsibility. But even one paid or unpaid medical bill – even if the oversight was the fault of your insurance company – can destroy your credit rating. Until lawmakers amend the federal Fair Credit Reporting Act then credit scoring cannot be considered a truly fair system to all Americans.
So are credit scores unfair to people who were laid off due to unavoidable circumstances? Probably not. Even people with good jobs have landed in unexpected financial trouble overnight. Many of these folks paid their bills early or on time, did not run up high credit card balances, and applied for new accounts only when necessary. But their adherence to our tried-and-true advice did not do them much good at the end of the day, because they ultimately could not pay their bills as promised. The credit scoring system does not consider why the bills were late or not paid, just the fact that the obligations were not met.