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.