Credit Reporting Agencies Remove Most Medical Debt from Credit Reports
The three largest credit reporting agencies are removing most of medical debt from consumer credit reports.
Equifax, Experian, and TransUnion, announced this week significant changes to medical collection debt reporting to support consumers faced with unexpected medical bills. These joint measures will remove nearly 70% of medical collection debt from consumer credit reports.
The majority (58%) of debt in collections stems from medical bills, according to a recent report from the Consumer Financial Protection Bureau (CFPB). Roughly 43 million Americans have medical bills on their credit report, with a total outstanding medical debt of $88 billion. The CFPB said about a week ago that it was working with government agencies and the medical community to determine whether it’s appropriate for unpaid medical bills to be included on credit reports.
According to the Kaiser Family Foundation, two-thirds of medical debts are the result of a one-time or short-term medical expense arising from an acute medical need. After two years of the COVID-19 pandemic and a detailed review of the prevalence of medical collection debt on credit reports, the nationwide credit reporting agencies (NCRAs) are finally making changes to help people to focus on their personal wellbeing and recovery.
Effective July 1, 2022, paid medical collection debt will no longer be included on consumer credit reports. In addition, the time period before unpaid medical collection debt would appear on a consumer’s report will be increased from 6 months to one year, giving consumers more time to work with insurance and/or healthcare providers to address their debt before it is reported on their credit file. In the first half of 2023, Equifax, Experian and TransUnion will also no longer include medical collection debt under at least $500 on credit reports.
“Medical collections debt often arises from unforeseen medical circumstances. These changes are another step we’re taking together to help people across the United States focus on their financial and personal wellbeing,” the three companies said in a joint statement. “As an industry we remain committed to helping drive fair and affordable access to credit for all consumers.”