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A large number of U.S. consumers will have their medical debt wiped from their credit reports, the nation’s largest credit reporting agencies announced Friday.
Equifax, Experian and TransUnion said in a joint statement they would remove nearly 70% of medical collection debt accounts from consumer credit reports after conducting months of market research. The changes will start to take place this summer.
“After two years of the COVID-19 pandemic and a detailed review of the prevalence of medical collection debt on credit reports, the NCRAs (nationwide credit reporting agencies) are making changes to help people to focus on their personal wellbeing and recovery,” the companies said.
Starting July 1, medical debts that were sent to debt collectors and eventually paid off will no longer be included on consumer credit reports. In the past, debts that were paid after being sent to collections could be included on credit reports for seven years. Consumers will also now have a year before unpaid medical collection debt appears on credit reports after being sent to collections. That’s up from the current six months, which the agencies said will offer people more time to work with their insurance or health-care providers.
Starting in the first half of 2023, Equifax, Experian and TransUnion will also stop including medical debts in collection that are below $500 on credit reports.
Medical debt, which can be extremely unpredictable, can cause even the most fiscally rigorous Americans to end up missing payments, which can result in lower credit scores that will hinder their ability to get the best credit or loan rates.
A February report by the Consumer Financial Protection Bureau estimated there is $88 billion in medical debt on consumer credit records as of June 2021. Most medical debts in collection on consumer credit reports are under $500, it added.
Black and Hispanic consumers, young adults and low-income individuals are all more likely to have medical debt than the national average, the report said. Older adults and veterans are also “heavily impacted” by the debt, it said.