Credit agencies announce major policy change impacting credit scores
The three nationwide credit reporting agencies — Equifax, Experian, and TransUnion — announced today that effective July 1, 2022, most medical debt will be removed from consumer credit reports.
The move comes following release of a report by the Consumer Financial Protection Bureau (CFPB) that indicates Americans have $88 billion in medical debt on their credit reports.
Here are the changes as announced by the reporting agencies:
Effective July 1, 2022, paid medical collection debt will no longer be included on consumer credit reports. In addition, the time period before unpaid medical collection debt would appear on a consumer’s report will be increased from 6 months to one year, giving consumers more time to work with insurance and/or healthcare providers to address their debt before it is reported on their credit file. In the first half of 2023, Equifax, Experian and TransUnion will also no longer include medical collection debt under at least $500 on credit reports.
The CFPB report on medical debt noted:
Roughly 20% of U.S. households report that they have medical debt. The CFPB found that medical collections tradelines appear on 43 million credit reports. As of the second quarter of 2021, 58% of bills that are in collections and on people’s credit records are medical bills.
The removal of medical debt should have a significant, positive impact on consumer credit scores. Consumer advocates were quick to applaud the move.
“We are thrilled that the credit bureaus are removing the vast majority of medical debt from credit reports,” said Chi Chi Wu, staff attorney at the National Consumer Law Center. “Medical debt has damaged the credit reports of tens of millions of consumers for far too long.”
Sen. Sherrod Brown, Chair of the Senate Banking, Housing, and Urban Affairs Committee said in a statement that the move demonstrates the importance of a strong Consumer Protection Bureau:
“Finally, millions of Americans will no longer have to worry about medical debt preventing them from getting a job, renting an apartment, buying a car, or getting a mortgage. No family should have their financial future ruined because they or a family member got sick,” said Brown. “Today’s announcement shows what happens when we have a CFPB that takes real action for consumers. I look forward to continue working with the CFPB to address the growing burden of medical debt, protect working families, and hold bad actors accountable.”
Advocates noted the importance of the issue since credit reports are used in major financial decisions.
“This move by the credit bureaus is a step in the right direction, but let’s get the rest of these medical debts off credit reports,” urged Ariel Nelson, staff attorney at the National Consumer Law Center. “Employers and landlords rely on credit reports, and no one should be denied a job or apartment simply because they got sick.”
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