SACRAMENTO, Calif. — Gov. Gavin Newsom recently signed a law to exclude medical debt from credit reports, an issue that affects nearly 40% of Californians.
As a state worker, Sonia Hayden said she was lucky to have had insurance when she was in an accident a few years ago.
“My tire blew out, my car spun around. It was a really scary event. I almost got hit by another car — it was awful,” Hayden said.
In 2023, Hayden and her partner were getting ready to buy a home when she noticed her credit score had significantly dropped.
“When I looked at our credit scores, mine was way lower than what I thought that it would be. It was about 100 points lower than what I thought. I was really confused," she said.
Hayden later found out that the reason her credit score dipped was from an unpaid hospital bill that she says wasn’t mailed to her or her insurance, so it went into collections.
“It’s already super hard to get ahead living in California. It’s really hard to get a home loan. Our mortgage rates are so high, so it was just this really scary thing where I thought we weren’t going to be able to buy a home,” she noted.
State Sen. Monique Limón authored SB 1061, which will impact around 11 million Californians that have medical debt.
“I think it’s really important to recognize that the bill ensures that that medical debt is not reported to a credit agency, but it does not forgive the debt,” Limón explained.
An amendment forced on Limón’s bill at the last hour means that patients who use a medical credit card or a specialty loan to pay for their hospital bill will not be protected under the new law.
Despite the amendments, Limón said her legislation will still make a difference for millions of Californians who are trying to buy a home, apply for a credit card, or secure a car loan.
“It’s going to be a great sense of relief because a lot of Californians that have been dealing with medical debt and been doing so in the context of knowing that this is reported to credit agencies…and that anything on credit reports is very difficult to change, if ever,” Limón adds.
Hayden said she’s grateful she could ultimately buy a house and hopes to see even more protections for consumers in the future.
“Nobody wants to have an accident. Nobody wants medical debt like that. It’s never something that’s wanted and so that’s what’s hard. It’s accidental. It’s not your fault,” she said.
The new law takes effect on July 1, 2025.