Credit companies TransUnion, Experian, and Equifax remove most medical debt from credit reports.
According to the Wall Street Journal, 70% of medical debt will be eliminated starting in July.
Medical debt can hurt credit scores for up to seven years after being paid off in full.
Millions of Americans could see their credit score increase this summer.
The Wall Street Journal reported on Friday that three major credit reporting companies — Experian, Equifax and TransUnion — were erasing nearly 70% of medical debt from their customers’ credit reports. From July, companies will remove previously paid medical debt from credit reports, which, according to the Journal, can hurt credit ratings for up to seven years after debt is paid off in full.
The companies also plan to remove unpaid medical debts of $500 or less, and new unpaid debts will not be added to credit reports for a full year after being sent to collections.
“This is an important step to support consumers in the wake of the Covid-19 pandemic,” the companies told the Journal in a joint statement. “These changes reflect our continued commitment to making access to fair and affordable credit easier for all consumers.”
The three companies currently serve more than 200 million Americans, so if the changes are implemented effectively, many will reap the benefits. A recent analysis by the Kaiser Family Foundation estimated that the total burden of medical debt in the United States is approximately $195 billion and that more than 3 million Americans are weighed down by medical bills of $10,000 that ‘they often can’t afford. Given the unexpected nature of medical debt that often stems from emergency circumstances, legislators and government agencies have taken steps to protect consumers from unfair collection tactics.
For example, a law took effect earlier this year that made surprise medical bills illegal, and the Consumer Financial Protection Bureau (CFPB) found that inaccurate medical bills cost Americans $88 billion a year. latest, prompting the agency to work with the credit bureaus to avoid unnecessary financial outlays. costs. The three companies told the Journal they were working to appease the CFPB, given the agency’s recent crackdown on medical billing.
“When it comes to medical bills, Americans are often caught in a catastrophic loop between their medical provider and their insurance company,” CFPB Director Rohit Chopra said in a statement recently. “Our credit reporting system is too often used as a tool to coerce and extort patients into paying medical bills they may not even owe.”
The agency has looked at medical debt collection practices over the past decade. In 2014, the CFPB released a report that found that medical debt was generally not a good indicator of defaulting on future debt, in part because most of that debt resulted from emergency circumstances. . And more recently, the Department of Veterans Affairs worked with the CFPB to allow most veterans’ medical debts to go unreported to credit bureaus after what were said to be years of inaccurate billings.
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