Nearly 70% of Medical Collection Debt to Be Removed From U.S. Credit Reports
- Many Americans struggle with medical debt and these debts can negatively impact credit.
- Upcoming reporting changes will result in nearly 70% of medical collection debt being removed from credit reports, providing a credit boost to millions of people.
Upcoming reporting changes will help ease the side effects of medical debt.
In the coming months, there will be significant changes to how medical collection debt is reported on U.S. credit reports. All three credit bureaus announced upcoming changes that will remove nearly 70% of medical collection debt from credit reports. Here's what you need to know about this important change.
Your credit score can hold you back
Your credit can significantly impact your life. If you have little to no credit history or have a low credit score, you may struggle to get ahead financially. For example, it can be challenging to secure a loan with a low interest rate or get approved for a great rewards credit card.
If you experience financial difficulties, it can be a challenge to stay on top of debt. This is especially true for the many Americans with expensive medical bills. Even for those with health insurance coverage, medical care can be costly and it can result in unpaid bills.
According to a recent report by the Consumer Financial Protection Bureau, as of June 2021, there was $88 billion in medical debt on consumer credit reports.
If you've had medical debt sent to a collection agency, it might still appear on your credit report.
The Consumer Financial Protection Bureau notes that medical collection tradelines appear on 43 million credit reports.
Does medical debt impact your credit?
Any unpaid debt can impact your finances and your credit.
While most healthcare providers and insurance companies don't report debt directly to the credit bureaus, they may turn the outstanding debt over to a debt collection agency.
There is currently a 180-day grace period to give consumers time to resolve medical debt before the debt appears on credit reports.
If you don't pay off the debt before the above timeline, your credit report and credit score can be negatively impacted. Medical debt can stay on your credit report for up to seven years.
Consumers can expect the following changes
Equifax, Experian, and TransUnion have announced significant changes that could benefit consumers and change how their credit reports look.
Beginning July 1, 2022, the following changes will occur:
- All paid medical collection debt will no longer appear on credit reports.
- Unpaid medical collection debt won't begin to appear on credit reports until one year has passed.
This new timeline offers a six-month extension beyond the current timeline of 180 days, which gives consumers more time to work out how to pay off their debt.
During the first half of 2023, the following change will occur:
- Unpaid medical collection debt of $500 or less will no longer appear on credit reports.
Together, these measures will remove nearly 70% of medical collection debt tradelines from consumer credit reports.
Will these credit reporting changes make a difference?
Unfortunately, this change won't benefit everyone. There are likely many consumers with unpaid medical collection debt that totals well over $500.
However, these changes are positive and will help a lot of people. The removal of some medical collection debt may help more Americans improve their credit so they can take advantage of better financial opportunities in the future.
If you have medical debt or other debt, you're not alone. While balancing regular life expenses and debt can be difficult, it's essential to prioritize debt payoff.
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