Many Americans – even those with health insurance – are drowning in medical debt. One long-term illness or serious injury can result in medical bills adding up to many thousands of dollars. The Consumer Financial Protection Bureau (CFPB) puts medical debt in the U.S. at a total of somewhere between $81 and $140 billion. That debt can wreak havoc on your life and your credit score.
Even when the debt has been paid, it can take some time to come off of your credit report. That’s about to change.
Thanks in part to the CFPB’s efforts to get paid medical debt off of consumers’ credit reports, the three leading credit reporting agencies have announced several changes to reporting of medical collection debt. These changes are expected to eliminate some 70% of the medical debt that appears on Americans’ credit reports.
From July of this year paid medical collection debt will no longer be included on credit reports. Further, new unpaid medical debt that has gone to collection won’t appear on credit reports for a year. That’s double the current timeframe of six months. This will give people more time to work out payment arrangements with medical providers so that their debt doesn’t go to collection.
Finally, the reporting agencies plan to stop reporting any unpaid medical debt of $500 or less (and possibly even a higher total) sometime in the first half of next year.
The changes were announced in a joint statement by the chief executive officers of Experian, TransUnion and Equifax. They noted, “Medical collection debt often arises from unforeseen medical circumstances….As an industry we remain committed to helping drive fair and affordable access to credit for all consumers.”
Those with credit reports weighed down by debt (even paid debt) can face difficulty in getting mortgages, student loans and much more. These changes undoubtedly will help numerous people clear paid medical debt from their credit reports and give others a little more breathing room to minimize current medical debt. However, if your medical debt is still affecting your ability to pay basic living expenses, it’s wise to look at all of the options for getting your finances back on track, including bankruptcy. With experienced legal guidance, you can determine what’s best for you and your family.