Medical Debt & Credit Reporting
Medical Debt and Your Credit Report: Understanding the Latest Changes
Medical debt has long been a significant source of stress for consumers, especially when it impacts their credit scores. Thankfully, recent changes by the Consumer Financial Protection Bureau (CFPB) and the major credit reporting agencies—Equifax, Experian, and TransUnion—offer meaningful relief for many individuals.
What's New in Medical Debt Reporting?
As of mid-2023, the following critical changes have taken effect:
Removal of Paid Medical Debts:
Credit bureaus no longer report medical debts that have been fully paid. Previously, paid medical collections could remain on your credit report, negatively affecting your score.
Extended Reporting Grace Period:
Medical debts now appear on your credit report only after a 12-month waiting period. This gives you more time to negotiate with healthcare providers and insurance companies before unpaid bills impact your credit.
Exclusion of Small Medical Debts:
Medical debts under $500 are no longer reported. This change dramatically reduces the number of medical debts reported and protects consumers from small, often insignificant bills damaging their credit.
Collectively, these measures are expected to remove nearly 70% of medical debt entries from consumer credit reports.
Why These Changes Matter
Medical debt differs significantly from other forms of debt like credit cards or auto loans. Medical services are often unplanned, involuntary, and unpredictable. The CFPB found that medical debts are generally not indicative of overall creditworthiness. Consumers with medical debt are typically reliable payers who otherwise maintain good financial habits.
Research from the CFPB shows that medical debt unfairly penalizes consumer credit scores. Simply having medical debt on a report can lower scores by 10 points. Even after paying off the debt, scores could still be unjustly reduced by as much as 22 points.
Protecting Yourself from Medical Debt
Despite these advancements, vigilance is crucial. Debt collectors may combine multiple small debts to exceed the $500 threshold for reporting. Staying informed about your rights and regularly checking your credit report is essential.
Act Now: Verify Your Credit Report
If medical debts that should not be reported are appearing on your credit report—such as debts under $500, recently paid debts, or debts less than 12 months old—take immediate action. At Newhart Legal, we specialize in consumer protection and can assist you in disputing inaccurate medical debt information or other credit reporting errors and can seek money damages for the harm caused by the inaccurate reporting. Protect your credit and financial future by contacting us today for a free consultation.
Contact Newhart Legal at (561) 331-1806 or submit your information via the Contact Us page.