Medical debts on Equifax, TransUnion, Experian reports; credit score

The major credit bureaus, Equifax, Experian and TransUnion, just announced a major change in the way medical debt is included in your credit history.

Soon, 70% of medical debt will be removed from consumer credit reports, according to a joint statement released March 18. This means that unpaid medical bills can no longer weigh on your credit score, which is the key metric used to determine rates on credit cards, car loans, mortgages, leases and other loans and lines of credit.

Last week, Americans owed at least $195 billion in medical debt. This is despite the fact that more than 90% of the population is insured, according to the Kaiser Family Foundation.

It’s a “consumer-friendly change,” says Ted Rossman, principal analyst at “Many otherwise qualified borrowers see their credit ratings plummet because of medical debts that they are not responsible for or may not even be aware of.”

Removing paid debt could help improve credit scores

Effective July 1, paid medical debt will no longer be included in consumer credit reports. The credit bureaus also announced that in the first half of 2023, medical debt under $500 will also not be added to credit reports.

New medical debts will only appear one year after they are sent for collection, instead of the current six months. “The fact that new unpaid medical recoveries will not be reported for at least a year is also a consumer-friendly change that will give patients more time to settle these bills with their insurance company, which is often time-consuming and frustrating. .process,” Rossman says.

Under current rules, if a medical debt was collected and not paid, it could linger on someone’s credit report for up to seven years. Starting this summer, “if someone has paid off their medical collections, this removal will improve their credit scores, especially on older FICO models that are required for federally backed mortgages, and still used for some other financial products as well,” Rossman says.

“Medical care is essential and should not be penalised”

The decision comes after months of industry research, which showed that about two-thirds of this type of medical debt is the result of one-time or short-term medical expenses resulting from “acute medical need”, says the press release.

“After two years of the Covid-19 pandemic and a detailed examination of the prevalence of medical collection debt on credit reports, the NCRA [National Credit Reporting Agencies] are making changes to help people focus on their personal well-being and recovery,” the agencies said.

Video by Stephen Parkhurst

It looks like the credit bureaus are finally distinguishing between medical debt and other debt like credit cards, student loans or mortgages, Rossman says. “With all of this, you are voluntarily taking out a loan. A medical bill, in particular, is a different situation. We could be talking about a costly, life-and-death situation. There seems to be a recognition that medical care are essential and should not be penalized by the credit bureaus.”

That’s a long time coming, says Allison Sesso, CEO of RIP Medical Debt, a charity that has eliminated more than $6.6 billion in medical debt for Americans. “Medical debt is destructive and upends lives every day. Most people in the United States are one accident or illness away from financial ruin.”

If you’re currently struggling with medical debt, Rossman suggests negotiating directly with the doctor or hospital. “They often offer much more affordable payment plans than the average credit card rate of 16.34%,” he says.

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