Starting in July 2022, the nation’s three largest credit bureaus – Equifax, Experian, and TransUnion – will be removing nearly 70% of medical debt in collections accounts from credit reports.
“This is an important step to support consumers in the wake of the COVID-19 pandemic,” the companies said in a joint statement. “These changes reflect our ongoing commitment to helping facilitate access to fair and affordable credit for all consumers.”
It’s no secret the damaging, long-term effects medical debt can have. On credit ratings, housing options, loan eligibility, credit card applications. The list goes on. So, it’s no surprise that, in light of this news, the millions of consumers battling an estimated total of $88 billion in medical debt are breathing a collective sigh of relief.
After all, prior to the upcoming expunging of debt, medical debt could remain on a consumer’s credit report for up to seven years, even if it’s paid off. So, let’s break it down.
Effective July 1:
Paid medical debt that was in collections will no longer be included on consumer credit reports
New unpaid medical debts won’t get added to credit reports for a full year after being sent to collections
Effective Early 2023:
Equifax, Experian and TransUnion will no longer include medical debt in collections under $500 on credit reports.
This is a “tremendous thing” according to Jeff Smedsrud, the co-founder of Healthcare.com and a RIP Medical Debt board member, as it’s not just the elderly or those with medical conditions who find medical debt to be a major financial killer.
A recent Healthcare.com survey found that, while all living generations have indicated medical debt impact to their credit score, millennials are the highest at 52%. The same survey indicated one in four Gen Zers and Millennials with medical debt skipped a rent or mortgage payment because of their debt. And late payments certainly don’t help improve a credit score.
This surprise sigh of relief is great news for those who’ve paid off their medical debts but have still been suffering the effects of a negative mark on their credit score. It presents opportunities that previously seemed out of reach and will go a long way in offering support in the wake of such unprecedented, rapid change.
