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Medical Debts to be Removed from Credit Reports


According to a recent Kaiser Family Foundation research, roughly one in ten Americans (23 million) bears extreme medical debt. According to a survey by the Consumer Financial Protection Bureau, 43 million people in the United States have medical debts on their credit file totaling $88 billion as of last June. The outbreak of COVID heavily increased the burden as unemployment rose and the disease caused increase in the demand of medical care and consumer costs.

The three major credit reporting agencies, Equifax, Experian, and TransUnion, have announced that over 70% of medical collection debt will be removed from consumer credit reports in the near future. Paid medical collections debt will be wiped from credit reports beginning July 1. Moreover, the credit bureaus will allow the consumers resolve any outstanding balance in their credit file. In the first half of 2023, the credit bureaus intend to erase and no longer disclose medical collections debt under $500.

As per the CEOs of the said CRAs, the initiative is being taken to assist consumers across the US concentrate on their personal and financial welfare.

According to Consumer Financial Protection Bureau (CFPB), they are determining if it is fitting to put unpaid medical billing data on credit reports and is investigating use of medical debt by credit reporting agencies on their reports.

Impact of Medical Collection Debt on Credit Reports

After 60 to 120 days of nonpayment, medical debt is normally turned over to a collection agency. Following that, the major credit bureaus usually give consumer a time limit of 180-day time limit to settle the debt else they add the record to the credit report which eventually lowers your credit score. Medical collections debt, both paid and unpaid, often stays on your credit report for seven years after it is recorded.

When will the Paid Debt be Removed?

Paid medical collection debt will no longer be listed in credit reports issued by the three credit bureaus as of July 1. The agencies have also offered to extend the offered limit to a year instead of 180 years in order to pay or establish a plan to repay medical debts as part of the previously announced reforms.

Additionally, as per the credit bureaus, the medical collection debts of less than $500 will no longer be shown on credit reports. The majority of medical collection debt on credit records is less than $500, the CFPB reported.

Impact on Credit Score

Your credit score can drop significantly if you have a debt collection. The longer it has not been paid, the worse it gets. Once a collection has been removed from your credit report, you could see a positive change in your credit score.