Medical costs remain at the top when it comes to debts that burden consumers. In 2016, 43 million American adults – 20 percent of the population – dealt with out-of-control healthcare-related debts negatively affecting their credit.

Relief is on the way, ironically from an industry currently dealing with their own form of damage control following the now infamous Equifax hack.

Help For Consumers From Unlikely Sources

Equifax is teaming with Experian and TransUnion to provide a much-needed and unprecedented “grace period” before debts show up on credit reports. All three reporting agencies will give consumers more time, specifically 180 days, to get out from under their medical bills.

Credit Eric Schneiderman, New York attorney general, who reached a 2015 settlement with the agencies. The pact acknowledges what has been obvious for as long as FICO’s existence. Unpaid medical bills are not indicators of consumers’ creditworthiness due to the following:

  • The time needed to resolve insurance claims versus a collection agency’s timetable
  • The inconsistent and borderline “wild west” approach employed by many medical offices in sending accounts to collections
  • The complex and error-prone nature of the medical billing process with inaccuracies being reported in 75 percent of invoices

The settlement also calls for all three credit reporting agencies to immediately remove medical bills that are eventually paid by insurers.

Breathing Room That Benefits Some, But Not Everyone

The changes not only benefit consumers enduring health problems, but also their doctors and insurers. Time seems to be on their side when it comes to all parties sorting out legitimate disputes before negative information undermines FICO scores.

The new rule, while providing some breathing room, is not retroactive and can lead to aggressive collection actions. As with any problems involving unmanageable debts, the mandate may not provide the help that many consumers truly need.

In the end, a bankruptcy filing may be the best option to secure not only long-term debt relief, but also much-needed peace of mind.