Credit Reporting Agencies to Remove Most Medical Debts From Consumers’ Credit Reports

Equifax, Experian, and Transunion are overhauling how they report medical accounts in collection, erasing most medical debts from consumers’ credit reports.

By , Attorney

The three major credit reporting agencies—Equifax, Experian, and TransUnion—have announced that they will remove around 70% of the medical debts in collection that now show up on consumers' credit reports. But the catch is that this medical debt will drop off your reports only if it's been paid in full. Still, the end result is that millions of consumers' credit reports will likely improve.

To further help consumers, the credit bureaus are also making other changes in how they report medical debts, like by increasing the amount of time medical collection debt must be delinquent before it can show up in your credit history.

What Medical Debt Will Drop Off Consumers' Credit Histories?

The credit reporting bureaus will remove paid medical collection debt tradelines from consumers' credit reports as of July 1, 2022.

Also, the amount of time before an unpaid medical collection debt will show up in a consumer's credit report will be increased from 180 days (six months) to one year. Medical providers typically provide you with 60 to 120 days to pay your bill before sending it to collection. After that, collection agencies previously were supposed to give you six months before reporting the debt to the credit bureaus. Now, that time frame is one year. This more extended period gives consumers additional time to work out any problems with their bills and handle medical debt before it impacts their credit reports and credit scores.

By March 30, 2023, the credit reporting agencies will remove all unpaid medical collection debts that are less than at least $500 (meaning, this threshold could increase) from consumers' credit reports. Medical debts that fall under this threshold won't be reported even if they're unpaid and even if in collection.

Why the Changes in Medical Debt Reporting?

Currently, Americans have an estimated $88 billion in medical debt in their credit files. The Consumer Financial Protection Bureau (CFPB) published a report in early 2022 describing the credit bureaus' failures concerning this collective medical debt, like the failure to stop inaccurate reporting of medical debts in collection.

The report found that issues concerning medical debt disproportionately affect communities of color, younger people, older Americans, and veterans, and that many people have incurred coronavirus pandemic-related medical debt. The report also emphasized the unique characteristics of medical debt compared to other consumer debts. For instance, medical debts are often the result of a one-time emergency or an unexpected health situation.

So, under pressure from the CFPB, the agencies decided to change how they handle medical debts in Americans' credit files.

Your Credit Scores Could Go Up

CFPB research has shown that past-due medical debts aren't a reliable indicator of a person's ability to pay their other bills. Again, medical debts are often the result of a health-related emergency, not a pattern of money mismanagement. Yet, when these debts get reported to credit reporting agencies, they appear on a person's credit reports and lower their credit scores. (The information in credit reports is used to calculate FICO and other credit scores.) Lower credit scores can hurt your access to credit and can make it harder to find a home or a job if the landlord or employer runs a credit check.

The more recent credit scoring systems, like the newer FICO (called "FICO 9") and VantageScore models 3.0 and 4.0, give less weight to medical collections than other types of accounts in collection. And these models don't take paid medical collection accounts into consideration at all. But many lenders still use older FICO scoring models under which paid medical collection accounts can stay on your credit reports for as long as seven years.

So, these changes might result in improved credit scores, alleviating some of the issues consumers face when applying for credit or seeking housing or a job.

Review Your Credit Reports

After the credit bureaus' new policies go into effect, check your credit reports to ensure your credit scores won't be affected by medical debt that shouldn't be included in your reports. Even if you don't think your credit reports and credit scores will be affected by these changes in how the credit bureaus handle medical debts, you should regularly check your credit reports from all three credit reporting agencies.

Review your reports to make sure the information is accurate. If you find errors or inaccurate data in one or more of your credit reports, file a dispute with the agency that made the report. If that doesn't resolve the problem, look into other options, such as filing a complaint with the CFPB.

Effective date: July 1, 2022