Most Medical Debts To Be Removed From Credit Reports
Changes are coming to medical debt reporting on consumer credit histories. In fact, credit scoring is changing to help consumers – specifically those with medical debt. That's not something you hear every day! Could a change in medical debt reporting help you? Read on for what borrowers should know about changes to how medical collections debt is reported.
Medical Debt is a Huge Element of Consumer Debt
When you think of consumer debt, overspending on credit cards may come to mind first. However, according to Consumer Financial Protection Bureau research, there’s $88 billion in medical debt on consumer credit records as of last June. COVID-19 sure hasn’t helped. Those with excellent credit records are sometimes dragged down by medical debt, too.
Having a debt in collections can eat away at your credit score by 100 points. Keep in mind, that these new changes will not erase medical debt. You're still responsible for paying it off.
What You Need To Know
The three primary credit repositories (Equifax, Experian and TransUnion) have agreed to changes that will wipe approximately 70% of medical collection debt from consumers' credit files. Here's what you need to know.
As of July 1, 2022:
-
Medical collection debt will be removed from credit reports after it has been paid. Typically, debt sent to a collection agency remains on a report up to seven years.
-
Negative reporting for unpaid accounts will appear on reports only after 12 months have passed. This gives consumers extra time to finalize questions with providers and insurers before the debt affects their credit rating.
-
Medical collection accounts below $500 will not be included on reports at all.
Bottom Line
If you or someone you care about has been denied credit or paid more due to a low credit score impacted by medical collection debt, it may be time to try again.
Please reach out with questions or to see if these changes may improve your credit scores. And if you know of anyone else who could benefit, please pass the information along or let us know. The Greenway Team is happy to help.
