(NEXSTAR) – Many Americans who have seen their credit scores take a hit because of medical debt may soon see relief.
Effective July 1, three of the nation’s largest credit reporting agencies — Equifax, Experian and TransUnion — will stop including paid medical collection debt. Currently, this debt can remain on your file for seven years, CNBC Reports.
In addition, the agencies have agreed to extend the time before unpaid medical collection debt appears on a consumer’s credit report from six months to one year. Starting next year, medical collection debts under $500 will no longer appear on credit reports from Equifax, Experian and TransUnion.
The changes are expected to remove nearly 70% of commercial medical debt lines from consumer credit reports, the agencies said in a statement. joint statement earlier this year.
A recent report from the Consumer Financial Protection Bureau found that approximately $88 billion in medical debt recoveries appear on consumer credit reports as of early 2021. Medical recoveries were found on 43 million credit reports, according to the CFPB.
When medical bills appear on credit reports, consumers may find themselves at increased risk of bankruptcy, avoiding additional medical care, or having difficulty finding employment, says the CFPB. Debt can also lower your credit score, making it harder to get approved for loans, other credit, or better interest rates, CNBC reports.
“Medical recovery debt often arises 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,” Mark W. Begor, CEO of Equifax; Brian Cassin, CEO of Experian; and Chris Cartwright, CEO of TransUnion, said in a joint statement. “As an industry, we remain committed to helping foster fair and affordable access to credit for all consumers.”
The Biden administration has also made recent changes to tackle medical debt. In April, they announced reforms to reduce or eliminate medical debt as a factor in government lending decisions.