The three major credit bureaus in the nation are changing how they handle medical debt. This development will remove nearly 70% of medical debt from Americans’ credit reports, impacting millions of Americans who may soon experience having better credit ratings.
Credit reporting agencies stated that the COVID-19 epidemic was why they felt it was necessary to make the changes due to the high number of medical bills incurred by COVID patients.
According to a Consumer Financial Protection Bureau report, 43 million Americans have $88 billion of medical debt on credit files.
The three agencies stated that they would cease reporting any medical collection debt under $500 in the first half of 2023. According to JAMA, a review of 2021 in the medical journal JAMA, the average outstanding medical bill was $429 for 2020.
“Medical collections debt is often a result of unforeseen medical circumstances. These changes are yet another step we take together to help Americans focus on their financial health and personal well-being,” said a joint statement by the CEOs of Equifax EFX (-0.57%), Experian EXPN (-0.45%) and TransUnion TRUE (-0.55%).
A quarter of all households have medical debt. If these debts are found on a person’s credit report, according to the CFPB, it can limit a consumer’s access to credit.
Despite CFPB research indicating that past-due medical bills are not a reliable indicator of a person’s ability to pay their other bills.
Although the announcement by the credit reporting bureau focused on changes in reporting policies, that is a separate issue from the accumulation of medical debt.
Credit score models used to calculate someone’s credit score, also known as a soft pull check, have stopped considering medical debt. FICO and VantageScore, two popular credit check services, started to disregard paid medical debt many years ago. They also deemphasized unpaid medical bills in comparison to other bills.
A “hard pull” is used to obtain large loans, such as home purchases. It uses scores from the major credit agencies.
How to Manage Your Credit Card Utilization for a Better Score
Managing your debt-to-income ratio (DTI) is crucial to maintaining a healthy financial life. A high DTI can impact your credit score, making getting approved for
How to Manage Your Debt-to-Income Ratio for a Better Score
Filing for bankruptcy is a stressful process that can have severe consequences for your future finances and relationships. It’s vital to remember that filing for
How to Recover from Bankruptcy and Improve Your Credit Score
Establishing credit is vital to achieving long-term financial security, but doing so can be challenging for those with little or no credit history. Lenders and