The country’s major credit-reporting firms will soon remove roughly 70% of medical collection debt from Americans' credit reports, Axios' Pete Gannon writes.
Why it matters: Medical debt is the most common source of collection-related black marks on credit reports. It can lower people’s credit scores, making it harder or more expensive to secure mortgages, auto loans and other credit — and even make it harder to secure a job.
Details: The three major credit-reporting agencies, Equifax, Experian and TransUnion, outlined three changes in reporting:
- First, all paid medical collection debt will no longer be included in reports as of July 1.
- In addition, people will have 12 months, up from six, to settle medical bills before unpaid collection debt appears on reports.
- The third change, slated for the first half of 2023, will eliminate the reporting of all medical collection debt under $500.
The backstory: The agencies pointed to the COVID-19 pandemic as a catalyst for the changes.
- But they have also been under pressure from the Consumer Financial Protection Bureau, which has focused on credit reporting and inaccurate medical debts in particular, under director Rohit Chopra.
Of note: Medical debt collections are considered less predictive of future payment problems than other debt collections, as people rarely choose to incur it. (You agree to pay back a loan before taking the keys to a new car, but you didn’t necessarily plan to be accountable for a medical bill.)
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