Medical Debt on your Credit Report?

Negative information on your credit report can hurt you, by making it hard to rent an apartment or a job, OR by making you pay more for a loan or for insurance. When medical debt gets sent to a collection agency, that becomes a negative item on your credit report. One in five American consumers are affected by medical debt on their credit report.

Recent changes by the three major national credit bureaus (Equifax, Experian and TransUnion) will improve this situation for some, but not all, consumers.

Two changes were implemented July 1, 2022:

  1. Medical debts that were in collections for a time, but were then paid in full will be removed from your credit report completely.
    This means that medical debts will be treated differently than other debts. If I get behind on my car payment for a couple of months, but then get caught up, the fact that I was behind for a while will CONTINUE to show up on my credit report.
  2. Medical debts in collections will not appear on a credit report until one full year after the original date of delinquency. Previously, the wait was six months.
    This change helps consumers in situations where the problem lies in a billing error or incorrect insurance processing, rather than in consumer non-payment. A year provides enough time that the dispute will likely be resolved before a debt appears on a credit report.

Beginning in 2023, the third change will kick in:

  • Medical collections under $500 will never appear on a credit report.

These three changes will help many consumers reach a higher credit score, opening up opportunities and reducing costs of borrowing and insurance. Unfortunately, a large number of Americans with unpaid medical debts larger than $500 will not be helped by this change.

The Consumer Financial Protection Bureau issued an analysis of the change last summer. It is hoped that the changes will reduce the number of situations in which consumers feel they MUST pay a medical bill, even if they believe it is incorrect, in order to “avoid ruining their credit.”

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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