Old Uncleared Medical Bills May Cost You in Home Purchase

How often do you look at your credit report?  If you are like most of us, it’s not often, usually not even once a year.  If you’re in your 20’s and just starting out, maybe you have never seen it.  We decide to get the Report and, of course, we’re hoping for the best but secretly expecting the worst.  You can check your Credit Report, your Credit Scores (there are 3 of them), or both.

Most of us don’t check our credit report and scores unless there is a reason to….like buying a house, or taking a loan out for a car.  It’s kind of late at that point to try to correct any errors.  An inaccurate credit score (not in your favor) can be worth thousands of dollars to you in interest rate charges or other lender fees when you are trying to secure a loan for a home purchase.

If you have some time and are not at the 11th hour of a pre-approval process, get a free copy of your credit report from www.annualcreditreport.com and enjoy the peace of mind that comes with knowing all is in order.  If you get the report and find that an “issue” is showing up that shouldn’t be there, work on getting it fixed because it could take some time.  I believe the free report does not incude your scores, but you can get those for a small fee.

One of the common issues that can be a surprise on credit reports are old medical bill charges.  I have been through this myself.  Of course, I noticed it when I wanted to refinance many years ago.  The mortgage broker brought it to my attention.  The medical charge was a co-pay discrepancy and was ultimately paid by insurance, so it was off my radar.  Yes, it was another era when the lender would overlook those types of things.  Not now.  According to a recent article in the Los Angeles Times

“. . .some credit and mortgage industry experts say negative medical collection records are playing a little-recognized but significant role in depressing otherwise creditworthy loan applicants’ scores. Lower scores, in turn, are disqualifying borrowers from getting mortgages in today’s toughened underwriting climate or forcing them to pay higher interest rates, fees and down payments.”

A proposed bill is in the works, called the Medical Debt Responsibility Act.  It’s still in the early stages, but wanted you to be aware of it.

If interested, see the differences between traditional debt and medical debt here.