New Colorado law hides medical debt on credit reports
Under a new Colorado law, any medical debt on your credit report should have been hidden, but it’s a good idea to double-check, according to the Colorado Center on Law and Policy.
House Bill 23-1126, which took effect in early August, requires credit reporting companies to remove medical debt from Colorado consumers’ reports. It applies to specialized medical credit cards, but not to debts charged to an ordinary credit card.
The new law doesn’t eliminate the debt, but limits who can see it. A separate law passed earlier this year capped the interest rate Colorado residents can be charged on medical debt at 3%, though.
An estimated 700,000 people in Colorado have medical debt in collections, which works against them if they need to take out a loan, said Julia Char Gilbert, a policy advocate at the Colorado Center on Law and Policy. Some landlords and employers also check applicants’ credit reports, so an unpaid hospital bill can have repercussions for years afterward, she said.
“This law basically shields patients from those downstream effects,” she said.
There is an exception if a person is trying to get a loan for more than the Federal Housing Finance Agency’s conforming loan limit – the maximum amount that federal mortgage insurers are able to backstop. For most counties, that threshold is $726,200 this year, though counties with higher home prices have a more generous cut-off. At that point, a lender could see a report with medical debts included, though it’s not guaranteed they will, Char Gilbert said.
While it’s the credit reporting agencies’ responsibility to remove information about medical debts from their reports, it’s a good idea to check that they did, particularly if you anticipate someone will check your credit in the near future, Char Gilbert said.
“We know credit reports often contain errors,” she said.
Everyone has a right to receive a copy of their credit reports from Equifax, Experian and TransUnion once a year. To request your reports, visit AnnualCreditReport.com or call 877-322-8228.
You also have the right to dispute any incorrect information in your credit report. If you live in Colorado, that would include any medical debts that shouldn’t still show up. If the company won’t correct problems with your credit report, you can file a complaint with the Colorado Attorney General’s office. Another option is to ask the company to add a personal statement explaining the debt in your report.
The protections expire in July 2028, though it’s possible the legislature could pass another bill to extend them. People who move out of Colorado would no longer have state-level protection, and future lenders could see any medical debt in their history.
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