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Your medical debt could soon be excluded from your credit report, say top credit bureaus

Equifax, Experian and TransUnion said nearly 70 percent of medical collection debt will no longer show up on people’s credit reports

Starting in the first half of 2023, Equifax, Experian, and TransUnion will no longer include medical collection debt under at least $500 on credit reports. (Caleb Jones/AP)
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The three major credit bureaus said nearly 70 percent of paid medical debt, which can drag down people’s credit scores, will be removed from consumer credit reports by July 1.

Additionally, the bureaus — Equifax, Experian and TransUnion — said they would extend the time period before unpaid medical collection debt would be reported on a consumer’s credit file to one year, up from six months. The additional time can give people an opportunity to work with their health-care provider to settle any dispute or work out a payment plan before the debt is included on their credit report.

Starting in the first half of 2023, the bureaus will no longer include medical collection debt under at least $500 on credit reports.

The bureaus said this action comes after “months of industry research.”

“As an industry, we remain committed to helping drive fair and affordable access to credit for all consumers,” the chief executives of the bureaus said in a joint statement.

But the decision follows a major report from the Consumer Financial Protection Bureau (CFPB) that indicated the agency was seriously looking into regulatory rules to exclude such debt from credit reports.

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CFPB Director Rohit Chopra has been extremely critical of how medical debt is reported to the credit bureaus and thus factored into credit scores, which are used to determine creditworthiness for loans, apartments or insurance.

As of the second quarter of 2021, 58 percent of bills in collections were medical bills, according to the CFPB. The CFPB’s research also showed $88 billion in medical debt on consumer credit records as of June 2021.

“This action shows that a strong CFPB with a strong director can make transformational change for the lives of everyday consumers,” said Jenifer Bosco, staff attorney at the National Consumer Law Center (NCLC). “The change will help most of the 15 percent of Americans with medical debt on their credit report.”

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Last week, NCLC issued a report looking at the impact of medical debt on Black households. “Due to racial inequities in health and wealth, the medical debt crisis has impacted Black families more acutely than white families,” wrote Berneta Haynes, staff attorney at NCLC and author of the report.

Sixty-two percent of bankruptcies are related to medical debt, according to the NCLC report.

“Unlike other expenses, medical bills often arrive unexpected, sending families spiraling into a financial crisis,” Haynes wrote. “The situation worsens as medical bills go unpaid and end up reported to credit bureaus, harming consumer credit scores that increasingly have become important for obtaining employment, housing, and other financial products.”

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Medical debt can plague people for years. Yet research has demonstrated that medical billing data on credit reports is typically an unreliable indicator of people’s ability to pay their bills, the CFPB said.

Some newer credit scoring models don’t give much weight to medical collections, often resulting in an average 25-point increase in consumers’ credit scores, the CFPB said.

“Millions of Americans have experienced credit report coercion: where they are pressured to pay medical bills they may not even owe, to prevent a black mark on their credit report that can threaten their employment, housing, and credit prospects,” the CFPB said in an email.

The CFPB said it will be “closely reviewing the details of the credit reporting agencies’ plans.”