Home Consumer debt How Medical Debt Can Unfairly Ruin Your Credit Score: Hits

How Medical Debt Can Unfairly Ruin Your Credit Score: Hits

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Penelope Wingard of Charlotte, North Carolina, survived breast cancer, a brain aneurysm and surgery on both eyes. Over the past eight years, she has also been saddled with tens of thousands of dollars in medical debt.

Aneri Pattani / KHN


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Aneri Pattani / KHN


Penelope Wingard of Charlotte, North Carolina, survived breast cancer, a brain aneurysm and surgery on both eyes. Over the past eight years, she has also been saddled with tens of thousands of dollars in medical debt.

Aneri Pattani / KHN

After a year of chemotherapy and radiation, doctors told Penelope Wingard in 2014 that her breast cancer was in remission. She had prayed for this good news. But it also meant she no longer qualified for a program in North Carolina that provides temporary Medicaid coverage for patients undergoing active treatment for breast cancer.

Wingard became uninsured. She had survived the medical toll, but the financial toll was ongoing.

Bills for follow-up appointments, blood tests and scans quickly piled up. Soon, her oncologist said he wouldn’t see her until she paid off her debt.

“My hair hadn’t even grown back after the chemo,” Wingard says, “and I couldn’t see my oncologist.”

Medical debt caused her credit rating to drop so low that she struggled to qualify for loans, and applying for jobs and apartments became a heartbreaking experience.

“It’s like you’re being punished for being sick,” Wingard says.

Earlier this year, when three national credit bureaus announced new policies to deal with medical debt, consumer advocates celebrated, believing it would bring relief to patients like Wingard. But it turns out the changes aren’t enough to help him or many other black and low-income patients, who are often the hardest hit by medical debt.

“They just take away the little things”

Under the new policies, Equifax, Experian and TransUnion will remove from credit reports all paid debts or individual bills under $500 that have been subject to collections, even if they have not been paid. It doesn’t erase what people owe, but the idea is to remove the black mark of collections from their credit so they can more easily reach milestones like qualifying for a car or home loan.

The changes, which will take full effect in 2023, are expected to benefit about 16 million Americans. But one federal report published this summer suggests that it may not be the people who need it most.

“Although the credit reporting companies have been trumpeting this as a big change, the fact is they’re just cutting out the little things,” said ryan sandler, co-author of the report and senior economist at the Consumer Financial Protection Bureau. “They may not be doing a thing as well as their press releases would have you believe.”

Medical debt highest in southern states that haven’t expanded Medicaid

Those most burdened by medical debt tend to be black or Hispanic, low-income, and in the South. A KFF national survey found that 56% of black adults and 50% of Hispanic adults report having current debt due to medical or dental bills, compared to 37% of non-Hispanic white adults. And one study published in 2021 found that medical debt was highest in low-income communities and in southern states that had not expanded Medicaid.

But, says Sandler, “the population that is going to have all of their collections removed are somewhat more likely to live in predominantly white neighborhoods and higher-income neighborhoods.”

Collections under $500 are often the result of a delinquency share Where coinsurancesays Sandler, and insured people are more likely to be wealthier and whiter.

Someone like Wingard — a black woman living in North Carolina — is less likely to benefit from new credit company policies.

After Wingard’s oncologist cut her, it took almost six months to find another doctor who would see her while leaving the bills unpaid.

North Carolina hasn’t expanded Medicaid, so despite her low income, Wingard, who is 58 and doesn’t have young children, doesn’t qualify for her state’s public insurance program.

She estimates that her total medical debt is now over $50,000. It’s not just about cancer care, but also about bills for unrelated health issues that grew over the following years.

She’s worked as an after-school teacher and tutor, COVID-19 contact tracer, and driver for a ride-sharing service, but none of those jobs come with health insurance benefits. Wingard says she tried to buy private insurance in the market several years ago, but her monthly premium would have been over $200, which she can’t afford.

That left her on the hook for bill after bill after bill. His credit report shows five pages of notices from collection agencies representing doctors’ offices, hospitals and labs.

Nearly 20% of people with medical debt fear they will never pay it off

Wingard is resourceful. She tracked down clinics that operate on sliding scale fees, pharmacy programs that lower copayments, and nonprofits that help cover health care costs. But that wasn’t enough to get her out of debt.

In February, Wingard needed a specialist mammogram to check for cancer recurrence. Prior to the appointment, she contacted a local nonprofit that agreed to cover the costs. But a few weeks after the procedure, Wingard received a bill for nearly $1,900. There was miscommunication between the nonprofit and the hospital, Wingard says. As she tried to fix the problem, the bill went to collections. It’s over $500, so it won’t be removed even when new credit agency policies take full effect next year.

“You fight so hard and go through so much,” Wingard said. “Yet sometimes you don’t see any kind of relief.”

According to the KFF poll, nearly 20% of Americans with medical debt don’t think they’ll ever be able to pay it all back. Wingard resigned herself to living with the ramifications.

“It makes you feel useless, like you can’t do anything”

Her refrigerator and stove have been broken for over a year. She can’t qualify for a loan to replace them, so instead of baking chicken from her favorite family recipe, she often settles for a can of fast food soup or chicken wings.

In an emergency — like when she had to fix a broken tooth this fall — Wingard borrows from her family. But it’s not easy to ask for money, she says. “It makes you feel useless, like there’s nothing you can do.”

A recently published study found that medical debt renders many people unable to afford basic public services, increases their housing and food insecurity, and can “contribute to a downward spiral of poor health and financial insecurity.”

How Bad Credit Reports Hurt Job Prospects

For Wingard, it hurt his ability to find a job. She says two employers told her bad credit shows up as a red flag on background checks and led to her being denied positions.

Employers sometimes use credit reports as a “character proxy,” explained Marc Rukavina, program director of the nonprofit health advocacy group Community Catalyst. If two applicants are equally qualified but one has poor credit or multiple outstanding debts, employers might see that person as less responsible, he says – despite research showing medical debt is not an accurate predictor of a person’s likelihood of paying their bills.

While new policies from credit companies are unlikely to improve Wingard’s situation, consumer advocates say there are signs the company is starting to think differently about medical debt.

The Biden administration has advised federal lenders to stop considering medical debt when evaluating loan applications and asked the Consumer Financial Protection Bureau to investigate whether medical debt should ever show up on credit reports.

A federal law prohibit certain types of surprise medical bills came into force this year, and some states have enhanced protections against medical debt expanding Medicaid or holding nonprofit hospitals accountable for provide financial assistance to low-income patients.

In August, VantageScore, a company that calculates credit scores, said it stop using medical collections in its formula.

Wingard is ready for a faster and stronger change. And she has an idea for doing just that: a march on Washington to demand medical debt relief and universal insurance to reduce future bills.

“For a million people to come together there and say we need better health care, I think that would be historic,” she says. “Maybe then they will recognize that we need help.”

KHN (Kaiser Health News) is an editorially independent national broadcaster KFF (Kaiser Family Foundation).