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Non-profit erases medical debt for 127,000 Texans
The non-profit organization Undue Medical Debt says that it just paid off $245 million dollars in medical debt for 127,000 Texans, buying it for pennies on the dollar. The group says recipients are receiving letters notifying them of the payoff.
HOUSTON - A district court judge in Texas recently reversed a rule that would have banned medical debt from credit reports.
That means that medical debt can weigh down your credit score and result in higher interest rates when you apply for car loans, credit cards or mortgages.
This comes as the non-profit organization Undue Medical Debt says that it just paid off $245 million dollars in medical debt for 127,000 Texans, buying it for pennies on the dollar. The group says recipients are receiving letters notifying them of the payoff.
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People with medical debt cannot apply for this help. Undue Medical Debt pays off debts randomly for people whose incomes are at or below 400% of the federal poverty level, or have medical debt over 5% of their annual income.
Medical debt ban reversed
What we know:
Now that a federal court has reversed the new ban on medical debt on credit reports, it can now appear there after it has gone unpaid for one year.
The three credit bureaus, Experian, Equifax, and TransUnion, say they're going to continue to exclude medical debt under $500.
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But debts larger than that could impact your score. VantageScore says it will not include medical debt. However, FICO still considers medical debt over $500, but it's weighted less than other types of debt.
"When it’s on someone’s credit report, it reduces their ability to borrow money, to purchase a home, to get a car loan. And these are things that help you move forward and have stability in life. It really undermines people, sometimes its even a part of a job application," explained Allison Sesso, CEO of Undue Medical Debt.
She says that having medical debt can also impact someone's health.
"It prevents people from going to the doctor, from having follow-ups, because they’re ashamed and concerned about getting deeper into medical debt. They’re worried about assets being taken away, or being taken to court or being sued," said Sesso.
What you can do:
If you have medical debt on your credit report, let the provider know if there are any errors on the bill. You can also dispute errors with the credit bureau.
If you're unable to pay the debt, you can negotiate with the provider to settle it for a lower amount or set up a payment plan. You may also be able to receive financial assistance, as many non-profits, hospitals, and healthcare providers offer charity care.
You can check your credit report at all three bureaus for free every week at AnnualCreditReport.com.
The Source: Information in this article is from Undue Medical Debt, the Associated Press, and AnnualCreditReport.com.