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Medical emergencies and even some doctor’s visits can result in outstanding medical debt, which could have a negative impact on your credit score if you’re unable to make payments. Now, thanks to a new provision implemented by the three major credit reporting agencies, things are about to change.
On Mar. 18, all three bureaus: Equifax, TransUnion, and Experian, announced that they would be wiping out 70 percent of medical debt from consumers’ credit reports beginning July 2022. Here’s the catch. Medical debt will no longer appear on your report, only if the debt has previously been paid in full. The agency is also changing how long it takes for debt to appear on a consumer’s report from “six months to one year,” CNBC noted.
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The new decision will also have an impact on unpaid debts. On Friday, the agencies revealed that they would remove unpaid medical debts from reports if the bill is less than $500. This will slowly take into effect within the “first half of the next year.”
“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 well-being,” the companies said in a joint statement,” according to CNN.
Typically, medical bills are not reflected on your credit report if you’re paying them through your original provider, but when expensive medical bills go unpaid, they are usually sent off to collections, putting your credit at risk of decreasing. According to Lexington Law, collection debt can cause your credit score to decrease “as much as 100 points”, sending your credit from fair to poor. Pesky debt collections could remain your report for up to seven years, too. Now, thanks to the new change, this could be great for individuals looking to repair or even increase their credit.
Credit risk agencies like FICO and VantageScore have already appeared to show a lower emphasis on unpaid medical debt in comparison to other bills that can result in major collection debt like credit cards and student loans.
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