The burden of medical debt weighs heavily on the credit scores of millions of Americans, even though this debt may arise from a single incident related to a critical health problem. Since the start of the pandemic, concern over the impact of this debt has only grown.
Now, the three major credit reporting agencies have announced that they will no longer include medical debts in credit bureau reports, to stop a person’s credit from being tarnished by medical debt.
The three major credit bureaus will stop reporting medical debt paid after it is sent to collections in July 2022, clearing this information off a person’s credit report rather than allowing it to remain for seven years as it can now.
Medical debt won’t appear on credit reports if it is less than $500 or less than one year old, a move that will give consumers six months to address their debt before it appears on their reports.
The bureaus said these steps would effectively remove 70% of consumer credit reports from containing information about medical debt. The New York Times reports other credit reporting agencies have already taken steps to remove damaging medical debt from credit reports, adjusting their scoring models to adjust the weight given to this debt, which has already been shown to be less risky than other types of debt.
According to a recent study from healthcare.com, almost half of millennials and Gen Xers said medical debt negatively affected their credit scores. The impact was not small. The average credit score of people whose debt had been sent to collections fell 110 points, according to a study.
Although major credit reporting agencies may change the way medical debt is reported, this does not mean that the debt is forgiven or that it stops negatively impacting your credit report. Most importantly, it gives consumers a little more time to pay off their debts and keeps them off their credit reports.
To keep on top of any marks that may affect your credit, engage a credit report monitoring service to assess your report to stay on top of any marks that may affect your credit.
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