Most medical debts are being removed from credit reports

Closeup of woman's hands as she makes calculations while looking through billsImage: Closeup of woman's hands as she makes calculations while looking through bills

In a Nutshell

Equifax, Experian and TransUnion say nearly 70% of medical collection debt is expected to be removed from consumers’ credit reports.
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The three major credit bureaus say they expect to strip nearly 70% of medical collection debt from consumers’ credit reports, providing some relief to tens of millions of people whose credit scores may have taken a hit from unpaid healthcare bills.

The credit-reporting firms — Equifax, Experian and TransUnion — say consumer credit reports will no longer include medical debt that was paid after it was sent to collections. The changes took effect July 1, 2022.

This is a big deal since medical collections can currently stay on your credit reports for up to seven years, even if you eventually pay.

Unpaid medical debt grace period extended by six months

In another win for consumers, new unpaid medical debts won’t be added to credit reports for a full year after being sent to collections — an increase of six months.

Extending this grace period will give people more time to work with their healthcare providers to settle disputes or to work out a repayment plan before a record of the unpaid debt shows up in their credit reports.

The bureaus also say that starting in the first half of 2023 they won’t include unpaid medical debts under $500.

How many Americans are plagued by medical debt?

The changes by the credit bureaus, announced March 18, 2022, in a joint statement, followed a report from the Consumer Financial Protection Bureau that found roughly 20% of U.S. households have medical debt. 

When medical debt ends up in collections, the consequences can be serious. Medical bills that show up in credit reports can make it harder to get credit, buy or rent a home or find employment. 

As of the second quarter of 2021, 58% of bills in collections were for medical debt, according to the CFPB, whose research showed $88 billion in medical debt on consumer credit records.

And COVID-19 has made the situation worse, the agency says, as both uninsured and insured patients had to cover costs for pandemic-related treatment, including testing and hospital stays.

What does this mean for me?

If medical collections debt that you paid off is on your credit reports, it may have come off in July 2022.

And if you have unpaid medical bills, you might get a little extra time to pay them before the debt in collections is reflected on your credit reports. Until then, however, it could be helpful to pay down your medical debt — or, if you’re struggling, you may be able to get help with your medical bills by setting up a payment plan, negotiating your bill, or possibly even getting financial assistance.

What’s next regarding medical debt?

Although the CFPB found that medical collections accounts appear on 43 million credit reports, the agency’s previous research found that the presence of medical debt in collections on a credit report is a less predictive indicator of a person’s credit risk than nonmedical debt.

The credit bureaus say that after months of industry research, they’re now acting to help pandemic-weary consumers focus on their health and recovery.

Also, the CFPB plans to do more research on how current medical billing, collections and credit reporting affect patients and their families. The agency said it will consider whether data on unpaid medical bills should be included in credit reports at all.

About the author: Brad Hanson is a senior editor at Credit Karma. His 30 years of experience in print and digital media includes work for the Los Angeles Times-Washington Post News Service, and Polyvore. Most recently before… Read more.