Matthew within the Center | Updates to the Truthful Credit score Act – Instances-Customary

The Biden Administration recently got the Consumer Finance Protection Bureau (CFBP) to make amendments to the Fair Credit Act, mainly dealing with medical collection accounts. Of course, social media went wild with a little bit of fact and a lot of speculation. Here’s the real scoop. Effective July 2022, any paid medical collections under $500 will be removed from your credit history. Effective June 2023, any unpaid medical collections under $500 will be removed from your credit report. Also starting July 2022, it will take 12 months (from date of medical service) before any medical collection account can show up on your credit report. These changes are huge and it gets better.

If you’re in the market for a home or auto purchase, I highly recommend you monitor your credit history via “annualcreditreport.com.” This site used to give you a free credit report from all three credit repositories (Equifax, Experian and TransUnion) once per year. Through the remainder of 2022, you can request your free credit reports once per week.

I also highly recommend you download Credit Karma app to monitor your credit profile and be on the lookout for any identity theft and credit fraud. Credit Karma allows you to dispute any derogatories (late pays, collection accounts, etc.) with two of the credit repositories (Equifax and TransUnion) online or via your smartphone.

You can sign up directly with all three credit repositories (Equifax.com, Experian.com and TransUnion.com) online to monitor your credit history and dispute any and all derogatory items that show on your various credit reports. They will try to up-sell you into paying for some premium credit service. Just decline and keep your free credit monitoring service. Disputing your credit lates is called “throwing spaghetti at the wall.” By law, each credit repository must give you the outcome of their investigation within 30 days. The best that will happen is you get a derogatory item removed. The worst that can happen is nothing.

But here’s the trick — dispute any lates or collection accounts every 31 days. By federal law, the credit repositories have 30 days to give you the results of their investigations in writing. For small dollar amount medical collection accounts, they don’t want to spend the manpower (money) investigating these disputes every 31 days and many of these collection accounts will drop off your credit history. Once this occurs, your FICO credit scores increase instantly.

Do you know what SOL stands for? Under the Fair Credit Act, any written debt contract (loan) is valid four years from the date of service or the last payment date, whichever is sooner. After four years, the debt is considered “time barred” or uncollectable as it is beyond California’s four years Statute Of Limitations (SOL) and a collection agency cannot collect on that debt. If any collection agency tries to collect on a debt beyond four years, ask them to send you an invoice. You can then sue them in small claims court and you will win $1,000 per debt.

Always ask any collection agency to validate the debt, especially if it was a medical collection account.

What was the date of service for each bill?

What was the specific service for this bill?

Who was the original provider of service?

What was the total amount billed?

How much did my health insurance pay?

If they do not validate your debt in writing within 30 days, you can sue them in small claims court to remove the collection account and demand $1,000 per debt.

I can’t stress enough if you pay on an old debt — even $1 — it restarts the clock for them to collect against you for another four years. Instead, you may want to “Settle To Remove.” Offer to pay a settlement (fraction of the debt) only if the creditor agrees in writing (signed and dated letter on their letterhead) to remove the debt from your credit history. Why would you allow a $45 medical collection account to lower your FICO scores when paying and removing a collection account can increase your FICO scores by 40 points?

While derogatories (late pays) can stay on your credit report for seven years, there are four debts that follow you for life: tax liens, child support, court costs and student loans. Those four debts do not go away. By taking control of your credit history you can get lower mortgage and auto loan rates and premium credit cards will come to you offering free travel.

Matthew Owen resides in Eureka and believes the First Amendment allows for free speech.