SPOKANE, Wash. — Washington residents may see their credit scores improve this year following new legislation that removes medical debt from credit reporting.
The bipartisan law, signed in April, eliminates medical debt from credit score calculations in Washington state.
“Medical debt accounted for over 50 percent of all credit collections so now that medical debt isn’t impacting credit reports any longer it allows everyone to have more access to positive financial products,” said Jessica Golladay, vice president of consumer underwriting at STCU.
Understanding Credit Impact
Credit scores affect more than just loans. They can impact job applications, apartment rentals, loan approvals and cell phone contracts.
“Credit is incredibly important because it’s the history of how you manage your debts,” Golladay said.
Several factors determine credit scores: “The amount of debt that you have outstanding, the number of accounts that you have open, the inquiries, and of course on time payment, repayment history.”
Many consumers mistakenly believe avoiding credit entirely helps their financial standing.
“Some borrowers will feel that they shouldn’t have any open accounts and that it would be better to not have credit accounts open and active at all because that would be damaging, that’s untrue,” Golladay said.
Building Credit Responsibly
Late payments can severely damage credit scores for years.
“Never want it to lapse, anytime you were to have a late payment report to your credit report it can take years to recover from the score drop that that will create,” Golladay warned.
For parents teaching credit responsibility, adding children as authorized users on existing credit cards can help build positive payment history.
“Even an option would be to add as an authorized signer on someone’s credit card that’s already existing and be able to charge, pay it down and create some responsible behavior that way too,” Golladay said.
STCU recommends checking credit reports for free at annualcreditreport.com.
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