Starting July 1, 2022, the three major credit bureaus, Equifax, Experian, and TransUnion will remove billions of dollars in medical debt from Americans credit reports.
This is a much-needed change. Medical debt can happen if you require frequent medical care, are diagnosed with a major illness or if you make an unexpected trip to the emergency room. Bills can add up quickly and many people find they are unable to keep up with the payments. Some hospitals and medical providers are very unforgiving and quick to turn your account over to a collection agency.
Once an account has been referred to a collection agency it can damage your credit and lower your credit score and the debt could remain on your report for up to 7 years. The impact of that can cause lenders to deny services or charge a high interest rate due to your rating.
Currently, the debt is reflected on your credit report after 6 months of nonpayment.
Credit Bureaus have been under pressure for some time to adjust how they handle medical debt. This announcement comes on the heels of a report released by the Consumer Financial Protection Bureau, (CFPB) titled “Medical debt burden in the United States”
What Will Change?
Medical collection accounts that have been paid will be removed from your credit report.
Medical collection accounts that are less than a year old will not be included in your report (previously these would show up on your report after 6 months) by extending the time to 12 months it will give people a chance to pay the debt or work with their insurance company to cover the portion they are responsible for.
Previously even medical debt that had been paid could stay on your credit report for up to 7 years. With this change paid medical debt will be removed from the report once payment has been received.
In early 2023 medical collection amounts under $500.00 will no longer show up on credit reports.
What Will not Change?
These changes do not cancel your medical debt. You are still responsible to pay any outstanding medical bills. Any unpaid debt over $500.00 that has been turned over to a collection agency and has been owed for more than 1 year may still show up on your credit report.
The change does not apply to medical debt transferred to a loan or credit card. If you paid a medical bill with your credit card it is considered credit card debt, not medical debt. If you took out a loan to pay medical debt it is considered a loan, not medical debt.
What Should you do About Medical Debt?
When you receive a medical bill that you cannot pay in full, contact the provider and make payment arrangements before it is turned over to collections. Many providers are willing to accept monthly payments.
If your account is turned over to collections, they too may be willing to setup a payment plan. Some collection agencies will settle for a reduced amount if you make a lump sum payment. Before agreeing to a negotiated payment ask the collector to send a letter stating the terms of the agreement. Do not agree to anything or make any kind of payment until everything has been agreed to in writing.
Never give a collection agency access to your checking account.
When talking to them on the phone write down the details of the call. The name of the agency, the number you called, the date, the person you talked to and any other information that is exchanged.
If you send anything to the collection agency by mail, send it by certified mail.
The Tech Minimalist 