Medical Debt – What You Should Know

Joint Measures from Consumer Credit Reporting Agencies Remove Nearly 70% of Medical Collection Debt Tradelines from Consumer Credit Reports

Equifax, Experian, and TransUnion have announced effective July 1, 2022, they will no longer include medical debt paid after being sent to collections on consumer credit reports.  In addition, the time before unpaid medical collection debt appears on a credit report will increase from 6 months to one year.

The companies also announced that beginning in 2023, they will only report medical debt when the amount owed is at least $500.  They estimate that these changes will remove nearly 70% of medical collection debt tradelines from consumer credit reports. The announcement comes on the heels of a CFPB report issued earlier this month titled “Medical Debt Burden in the United States.”  The report aims at medical debt collections, with the CFPB indicating that it intends to determine whether it is appropriate for medical debt to be on credit reports.  Medical debt collection was also the subject of a January 2022 CFPB compliance bulletin which dealt with medical debt collection and consumer reporting requirements in connection with the No Surprises Act.

Last month, the Department of Veterans Affairs announced that it was adopting new standards for when it will report information on outstanding medical bills to consumer reporting companies.  The CFPB called the new standards “a clear and important precedent for the health care industry.”

Key Takeaways 

The U.S. big three major credit reporting agencies—Equifax, Experian, and TransUnion—are removing most medical debt from credit reports starting in July.

The change may provide relief to Americans dealing with financial consequences from incurring medical debts.

Experts applaud the change but say changes from credit reporting agencies alone are not enough to alleviate healthcare costs.

Businesses may find an increase in credit scores ranging from a few points to dozens rising in the coming months

In Summary

Equifax, Experian, and TransUnion — which furnish data on roughly 200 million Americans — said they would soon wipe away negative credit marks created by certain medical debts.

The changes, which include removing black marks for people who settled a debt after it went to collections, were highly received by consumer advocates and financial institutions and reflected a growing acceptance that such debts aren’t the best indicator of a consumer’s creditworthiness.

Informativ Disclaimer

All information contained within is based on the research and opinions of industry professionals with many years of experience in compliance, credit reporting, software, finance and lending fields along with actual Federal Agency documents. No representation of this material is considered legal advice. Always consult your legal advisor for clarification of any information contained within.


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