The three biggest credit bureaus announced changes to how medical debt is reflected on credit reports. Equifax, TransUnion and Experian beginning in July will stop including medical debts that were in collections before being paid, which prior to this change could stick around on a consumer's credit report for up to seven years. It will also take a year, no longer six months, before a medical debt in collections is reflected on a person’s credit report. Also, starting in the first half of 2023, the big three are also leaving out any medical collection debt under $500.
The moves came after pressure from the Consumer Financial Protection Bureau, which estimates that roughly one in five borrowers have some medical debts sitting on their credit reports and 43 million Americans have an estimated $88 billion in medical debt on their credit files.
Ken Monroe, the CEO of Background Investigation Bureau, applauds this change stating “When people have unexpected financial burdens due to sickness, accidents, and mental health issues, they shouldn't be punished financially by having their credit scores lowered. Struggling to pay unexpected medical expenses isn't a reflection of someone's financial responsibility. The very nature of medical care is most often unpredictable and, unfortunately, costly.”
A poor credit report can have ripple effects on someone’s ability to make important life investments like buying a house, qualifying for insurance, or opening a bank account. Taking medical debt out of the credit rating system is an excellent decision that will hopefully be adopted across the industry.
