Both federal and state laws impact your rights regarding credit reporting. Most pertinent state laws are under Title XXX (Contracts) and Title XXXI (Debtor-Creditor Relations) of the Kentucky Revised Statutes (KRS), but to determine how the law affects your individual situation, it's necessary to consult an attorney. Medical debt is epidemic throughout Kentucky and across America. The 2007 Commonwealth Fund Biennial Health Insurance Survey determined that 79 million Americans have medical debt (61 percent of these had medical insurance at the time). A 2007 Harvard University study determined that 62 percent of the bankruptcies filed in the United States are due to medical debt.
Many people believe that medical debt is not included in the calculation of FICO credit scores. They're wrong. In a hearing by the House of Representatives Financial Services Subcommittee on May 12, 2010, a representative from FICO, the dominant credit-scoring agency, admitted that collection accounts for medical debt are factored into the consumer's FICO score. You are entitled by law to get one free credit report from each credit bureau per year (a fee can be charged for more than that number); however, apparently this does does not necessarily apply to your FICO score. In 2009, Experian took the position that the access law does not apply to FICO scores. As of 2010, the law has not been clarified. Experian won't give you your FICO score at all—even if you're willing to pay for it. You can, however, get your TansUnion and Equifax FICO scores—but not for free.
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Doctors and hospitals don't report directly to the credit bureaus; they turn unpaid accounts over to collection agencies, which report it. The law does not prohibit medical debt from appearing on your credit report as a "Collection Account" with the type of debt listed as "medical."
Statute of Limitations
Medical debt is not treated differently than credit card debt in Kentucky. State law KRS 413.120 sets the statute of limitations for medical collection accounts to appear on your credit report at five years; the same as for credit cards.
Deleting Paid Accounts
In Kentucky, collection accounts for medical debt can remain on your credit report for five years—even if you pay it. Your report must reflect that the account is paid, but it still has a negative effect on your credit score. Federal legislation has been introduced in Congress, HR 3421, called the Medical Debt Relief Act of 2009, to prohibit this. It would require that collection accounts for medical debt be removed from your report within 30 days of its being paid; however Kentucky Senator Mitch McConnell is on record as opposing it.
- Health Policy Hub: Can Medical Bills Ruin Your Credit?
- Open Congress.org: H.R.3421 - Medical Debt Relief Act of 2009
- Debt Plan.org: Is Medical Debt going to Affect My Credit Score?
- Bloomberg Newsweek: Study Links Medical Costs and Personal Bankruptcy
- Fair Debt Collection.com: Statute of Limitations By State
- Federal Trade Commission: Complaint Assistant