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The impact of medial debt on credit reports

Starting on Sept. 15, there will be a 180-day waiting period before an unpaid medical bill can show up on a credit report. Also starting on that date, medical debts in collections that are paid by an insurance provider will be deleted from a credit report. While that may be good news for some Ohio residents, it may not help everyone who has poor credit because of unpaid medical bills.

If people have an account in collections, it could drop their credit score between 40 and 100 points. A reduced credit score may mean that an individual has to pay more for home and auto insurance. It could also mean increased rates on credit cards and other loans. Simply qualifying for a loan may be more difficult as well. To some, this is unfair because medical debts should be thought of as different than other obligations.

While new credit scoring models FICO 9 and Vantage 3.0 agree with this approach, their calculations are not widely used yet. There is also no way to tell if or when they will be widely adopted by creditors. Furthermore, consumers are urged to check their credit reports after the changes go into effect. This is because there is no way to guarantee that information will be deleted if it is supposed to be.

Those who are struggling with medical or other types of debt may benefit from filing for Chapter 13 bankruptcy. Doing so may make it possible to restructure debt payments and keep property at the same time. Under a Chapter 13 plan, debts are repaid over a period of three or five years. Once the repayment period is over, certain debts may be discharged.

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