March 22, 2022
The three major credit reporting agencies, Equifax, Experian, and TransUnion, announced in a joint statement they will be removing around 70% of medical collection debt from people’s credit reports, Fox Business reports.
From July 1, paid medical collection debt will no longer appear on consumer credit reports. People can expect more changes. Equifax, Experian, and TransUnion decided to increase the time period when the unpaid medical debt gets reported from six months to a year. By doing this, they are actually giving consumers an opportunity to pay their debt or discuss settling it with their insurance providers before it gets reported.
Additionally, starting from 2023, medical collection debt under $500 will no longer appear on people’s credit reports.
What Is the Current Amount of Medical Debt and What Causes It to Pile Up?
According to the Consumer Financial Protection Bureau, Americans accumulated $88 million in medical debt since June 2021. Last month, the CFPB stated that medical debt was the most common debt in the country. The reason for this is mostly due to the pandemic since many people were hospitalized at the time.
The CEO of Equifax, along with the CEOs of Experian and TransUnion, stated that: “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 wellbeing”.
How Does Medical Debt Affect the Consumers?
A bad credit score can be detrimental to your financial freedom. Many things can lead to a poor credit score, and not paying your medical debt is one of them. Medical debts could lead to a poor credit score, causing people to struggle to find a home or even a job. Moreover, without credit history or with a poor credit history, you’ll get a higher interest rate on loans.
Statistically speaking, people who live in the south (southeastern, southwestern area) in the US have a lower credit score, probably because of medical debt. Black, Hispanic, young adults, and low-income individuals are groups with higher rates of medical debt. Older adults and some veterans struggle with medical debt, as well.
How Will This Removal Benefit Consumers?
While there are a lot of things you could try yourself to fix your credit score, this debt removal will be very beneficial for consumers. Increasing the time period for medical debt allows consumers to repair their credit scores.
No one is responsible for unexpected medical emergencies and the reporting agencies believe they shouldn’t stand in the way of people getting the health treatments they deserve. In their joint statement, the CEOs of the three reporting agencies stated that they believe it’s important to allow consumers the right to fair and affordable credit to all.