Let’s set the scene here. A health issue comes up, requiring you to spend some time in the hospital. By the end of your stay, you are left with a hefty balance. You have health insurance, but it has a high deductible that you have not yet met. Once you reach that deductible, the insurance will kick in, but until then, it’s on you.
Problem is, you can’t afford the deductible. The hospital then informs you that it has a new program that pairs you with a loan vendor and sets up a payment plan for you to cover your costs. The hospital pre-screens your credit reports before sending you to the loan vendor who ultimately decides whether to approve the loan or not.
Sounds like a solution to your problem? But does the hospital have to let you know that they are checking your credit information? And does the hospital need your approval for checking your credit? Also will this put a blemish on your credit report?
A “soft” hit on your credit score
What the hospital is doing here is what is referred to as a “soft hit” on your credit. The hospital may want to run a “soft hit” on your credit score in order to pre-screen you for this payment program. This is similar to what happens when you get a credit card offer in the mail. The credit card company “soft” pulls a large number of consumers’ credit reports to pre-screen who they want to mail an offer to. Similarly, the hospital may want to “soft” pull your credit report before sending you to the lender.
Just like when you get a credit card offer in the mail, this does not harm your credit score in any way. It is also invisible to any other institutions that may check your credit in the future.
Your credit score would not be affected by this pre-screen, but it would be affected when it comes to actually applying for the loan (a “hard” hit).
But does the hospital have to give you notice that it is doing this ‘soft hit?”
As a consumer, you should be diligent. Bear in mind that the loan would likely come from a third-party vendor and your relationship to the hospital is still that of a health care provider and a patient who is entitled to certain patient privacy laws.
According to our litigation team, hospitals should follow the Fair Credit Reporting Act, which specifies the conditions in which a credit report can be pulled. The hospital would need to either get your authorization, or be making what’s called a “firm offer of credit” in order to pull your credit report. A “firm offer of credit” means that, so long as you meet the specified criteria (based on the information on the credit report), the offer of credit would be honored.
But with the hospital not even being the lender, it doesn’t have the capacity to make any kind of firm offer of credit – there are no guarantees. The hospital would not have the decision-making authority on whether to grant or not grant your loan – it’s the middle man between you and the lender. Thus, SAC recommends that hospitals always get your written consent before pulling your credit, even if it won’t hurt your score or be visible on your report.
So how can you be proactive?
As a patient, you can be proactive by asking the right questions when you find yourself in a situation where a hospital is setting you up with a loan to pay your medical bills. Find out more about the loan vendor, what their requirements are to get approved, whether your credit report will be pulled and, if so, when they will provide you with written notice so you can give consent..