Credit Bureaus to Remove Most Medical Debts from Credit Reports

Changes to medical debt collection reporting to start in the summer.

The three national credit bureaus have announced plans to overhaul how they handle medical collections reporting, resulting in tens of billions of dollars in debt being wiped from U.S. consumers' credit reports. The changes, which will go into effect this summer, will get rid of roughly 70% of the medical debt in collection accounts that are currently on consumer credit reports.

Key Takeaways

  • Experian, Equifax and TransUnion are changing how they manage reporting for medical debt in collections.
  • Changes include dropping paid collection accounts, delaying when medical collections are first reported and striking smaller medical debts altogether.
  • While these changes don't impact consumer responsibility to pay, they may alleviate some of the pain consumers feel when trying to apply for credit.
  • The announcement comes shortly after a report by the Consumer Financial Protection Bureau alleging that the credit bureaus allow erroneous reporting on medical debt.

Details on the New Changes on Medical Collection Reporting

Medical debt can be financially devastating, but it doesn't have to destroy your credit, too. At least that's what the national credit reporting agencies, Experian, Equifax, and TransUnion, are saying.

The credit bureaus have announced changes to how they manage the reporting of medical bills after they've gone to collections, which have been in the works for several months. Starting in July, the companies will automatically remove medical debts that were paid after they were sent to collections.

Currently, popular credit scoring models give less weight to medical collections than other types of collection accounts, and the newest FICO model ignores paid medical collection accounts altogether. But most major lenders still use older FICO models and even paid medical collection accounts can remain on your credit report for up to seven years.

Additionally, the credit bureaus plan to extend the timeline of reporting from 180 days after a medical bill has been sent to collections to one full year. This will give consumers more time to deal with medical debt without it impacting their credit scores.

Finally, in the first half of next year, the companies plan to remove all unpaid medical debts of less than $500, though that threshold may increase.

The Announcement Follows a Damning Report by Consumer Watchdog Agency

The country's top consumer watchdog, the Consumer Financial Protection Bureau (CFPB), released a report in early March detailing failures by the credit bureaus surrounding medical debt. The agency estimates that 43 million credit reports host $88 billion in medical collection accounts. In fact, 58% of all collection accounts are medical bills.

The CFPB also highlighted that the credit reporting agencies haven't done enough to stop inaccurate reporting of medical collection accounts, an issue that disproportionately affects communities of color.

In a joint statement, the credit bureaus said that the changes reflect the companies' commitment to facilitating access to fair and affordable credit. All three companies remain under investigation by the CFPB for their handling of consumer disputes.

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  1. Experian. "How Does Medical Debt Affect Your Credit Score?"

  2. Consumer Financial Protection Bureau. "CFPB Estimates $88 Billion in Medical Bills on Credit Reports."

  3. Wall Street Journal. "Most Medical Debts to Be Removed From Consumers' Credit Reports."