Credit report

Upcoming Credit Report Relief on Medical Debt

Medical debt on your credit report is just as harmful as a delinquent credit card.

And yet, medical debt is inevitable if you need treatment for an illness you can’t afford.

It’s a common problem: Nearly one in five American households couldn’t pay their medical bills upfront and had gone into debt, according to a US Census Bureau survey published in 2021.

But there’s good news ahead for people with minor medical bills that have gone to collection agencies and are dragging their credit score down. The three major credit bureaus – Equifax, Experian and TransUnion – are making changes to mitigate the impact.

Here is what awaits us:

  • Starting Friday, July 1, credit bureaus will no longer include paid medical debt on credit reports. Usually, debts – even those paid off – will stay on credit reports for seven years.
  • Beginning in 2023, unpaid medical debts in collections under $500 will not appear on credit reports.
  • As for new medical debts over $500, they will not appear on credit reports until one year after the debt is reported to collection agencies. Currently, it is six months.

Changes are voluntary and not due to government regulation. Consumer advocates welcome long overdue changes given the impacts of medical debt.

“If you have medical debt, it really accumulates and makes you vulnerable to other types of debt,” said Maribeth Guarino, health care advocate with the Public Interest Research Group of the State of Oregon, or OSPIRG, a nonprofit advocacy group. “Having that reflected in your credit score means it’s harder to find an apartment, rent a car, get a loan for your car or for your small business or for your home.”

The group released a tip guide to help people solve the problem.

A OSPIRG Report which analyzed nearly 8,000 bankruptcy filings in Oregon found that at least 60% of them included medical debts. Fifteen percent of bankruptcy cases in this report had more than $10,000 in medical debt.

OSPIRG recommends Oregonians take the Following steps:

  • After July 1, check your credit report and make sure it no longer lists paid medical debts. Check your information with all three credit bureaus, as information may vary.
  • You can receive a free copy of your online credit report at annualcreditreport.com. You can also call 1-877-322-8228.
  • Check the medical debt in the “Account Information” and “Collections” section of your report.
  • If you see inaccurate information, you can dispute it directly with the credit reporting agency that lists it. For that, you can go here: Experian; Trans Union and Equifax.

According to federal law, credit bureaus must investigate a dispute within 30 days and notify consumers within five days of its conclusion. If the credit bureau misses the deadline or fails to resolve the dispute, you can file a complaint with the Consumer Financial Protection Bureau. The complaint will go to a public database. The credit bureaus have 15 days to respond before it is published.

You can reach Ben Botkin at [email protected] or via Twitter @BenBotkin1.