Most medical debt will not appear on your credit report if it has been paid off

From July 1, Equifax (EFX), Experian (EXPGF) and Trans Union (TRU) will no longer include medical debts that have been collected on consumer credit reports once they have been paid off. This will eliminate billions of dollars of debt on consumer records.

In addition, unpaid medical collection debts will not appear on credit reports in the first year, when the previous grace period was six months, the three companies said. This will give people more time to work with their insurers or healthcare providers to settle the bills.

And starting in the first half of 2023, medical collection debts under $500 will no longer be included in credit reports.

Medical debt listed on credit reports can make it harder for consumers to access credit or secure jobs and homes, the Consumer Financial Protection Bureau said. in a report released earlier this month. It can also increase their risk of bankruptcy and cause them to avoid future care from Medicare.

Even after the bills are paid, the debt can linger for up to seven years on credit reports.

The three companies said they made the move after months of research.

“Medical collection debts often result from unforeseen medical circumstances. These changes are another step we are taking together to help people across the United States focus on their financial and personal well-being,” the companies said. in a joint statement.

The announcement follows research from the CFPB that shows Americans had accumulated $88 billion in medical debt on consumer credit files as of June 2021. This is the most common debt collection on credit files, the bureau said.

Medical debt can be volatile and unpredictable, and can affect many financially well-off consumers. Black, Hispanic, young and low-income consumers are most likely to be affected by medical debt, the bureau said.

Medical debt concerns have grown since the Covid-19 pandemic hospitalized millions of peopleand CFPB Director Rohit Chopra was publicly critical medical debt collections by credit reporting agencies. On March 1, Chopra said the CFPB would “look closely” at the big three credit bureaus.

“We expect them to take seriously their role as major players in the credit reporting system, a system whose integrity and accuracy can determine the financial future of hundreds of millions of people. “, said Chopra.

Lawyers for the National Consumer Law Center applauded the move, though they warned it would not help the most vulnerable patients whose serious illnesses or accidents have resulted in large medical bills.

“We are thrilled that the credit bureaus are removing the vast majority of medical debt from credit reports,” said Chi Chi Wu, attorney for the center, in a statement. “Medical debt has damaged the credit reports of tens of millions of consumers for far too long.”

Nearly one in 10 Americans has medical debt

Although more than 90% of the nation has health insurance, medical debt remains a major problem for millions of Americans, according to a recently published study. Analysis of the Kaiser Family Foundation US Census Bureau data. Indeed, many insured persons still have to deal with high deductibles and out-of-pocket expenses.

“A serious injury or illness can cost thousands of dollars to meet these deductibles and other cost-sharing requirements,” the analysis authors wrote. “For people with a chronic condition, even smaller co-payments and other cost-sharing expenses can add up to unaffordable amounts.”

About 23 million people, or 9% of adults, from more than $250 in health-related costs, which Kaiser describes as a large debt, in December 2019.

About 1% of all adults owed more than $10,000, Kaiser found. This group accounts for the vast majority of all medical debt owed.

Americans aged 35 to 64 included the highest proportion of those reporting at least $250 in medical debt. Seniors, who are eligible for Medicare, have the lowest rate.

Black Americans are much more likely to have significant medical debt, with 16% saying they owe at least $250, compared to 9% of white and Hispanic Americans. and 4% of Asian Americans.

About 11% of women reported having medical debt, compared to 8% of men. Part of the difference is likely related to the costs of childbirth and women’s lower average income, Kaiser said.

Americans living in rural areas, the South, and states that did not extend Medicaid to low-income adults were more likely to have large medical debt.

Census Bureau data suggests that Americans owed at least $195 billion in medical debt in 2019, Kaiser found. The figure is much higher than the CFPB because credit reporting companies cannot see all medical debt and not all adults have credit reports.

Editor’s Note: This article has been updated to clarify that credit reporting companies are removing medical debts that have been paid off from reports starting July 1.

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