Medical Debt Reporting Changes on Background Checks

Earlier this week, the three major credit bureaus announced that they would be overhauling their credit reporting of medical debt. As a hiring manager or property owner, you may be wondering how this will affect your employee or tenant screening. Let's take a closer look.

How Credit Affects Consumers

When a property manager runs a tenant background screening, the credit report generates a credit score. This information provides the property manager with a general idea of a tenant's ability to manage debt. In the case of employee screening, a number isn't generated but the credit report still provides the same information. A credit report may help or hinder the applicant's ability to land a job or a place to live, among other things. 

According to a study by the Federal Reserve Board, more than half of all bad-debt collections are due to medical bills, affecting more than 43 million consumers. In some cases, consumers aren't aware that medical debts have been reported to collections agencies while awaiting payment from insurance companies.

The Waiting Period Win

Three reporting agencies, TransUnion, Experian and Equifax have all agreed to a 180-day waiting period before reporting medical debts. This change allows 6 months for physicians, hopsitals and other medical providers to receive insurance payments before showing up on a credit report. Existing medical debts that are finally paid will also be removed from the reports. These small changes are a big deal to credit scores and could affect consumers as soon as they're implemented. 

Identity theft was the number one complaint to the Federal Trade Comission last year. There are also other credit mix-ups such as mistyped names or cases where two people with the same names get reported in each other's files.The waiting period can also alleviate this credit reporting confusion as it is cleared from a credit record.

What Does It Mean

As a property owner or hiring manager, credit reports will give you more of an accurate idea of the quality of your applicant. The credit history will give a truer statement of the applicant's credit and ability to manage debt. The identity theft and mistyped mix-ups won't leave you scratching your head. The medical debts, unless they are indeed bad debt collections, will be gone from the credit history. These changes will allow you to make a more informed decision about your applicant.

At VeriFirst, we provide assistance when looking at credit as well as other screening reports. Our FCRA certified staff works with you and your needs to help you make the decision with the right information on the right person.