One year after credit-reporting firms removed certain medical debt from U.S. consumers’ credit reports, 70% of the debt is no longer visible on their reports.
Last year, the three major credit bureaus in the U.S., Equifax
EFX,
+0.27%,
Experian
EXPN,
-0.97%,
and TransUnion
TRU,
-0.02%,
said they would stop counting certain medical debt in credit reports. The proposed change was a major overhaul in how medical debt was factored into an individual’s financial performance.
Last year, as MarketWatch has reported, the three credit bureaus announced that they would stop including medical debts in collections before being paid, but that came with a caveat: They said it would also take a year before medical debt in collections is reflected on a person’s credit report.
Past-due medical debt that’s reported to the credit bureaus can adversely impact individuals, from reducing their access to credit to renting or taking out a mortgage. Younger people, lower-income individuals, as well as people of color, are all more likely to have medical debt than the national average.
The bureaus on Tuesday announced that these changes, which went into effect on July 1, 2022, would remove a significant amount of debt off individuals’ credit reports. (They also said medical debt below $500 would not be reflected in people’s credit reports.)
‘We are committed to continuously evolving credit reporting’
“We understand that medical debt is generally not taken on voluntarily and we are committed to continuously evolving credit reporting to support greater and responsible access to credit and mainstream financial services,” the CEOs of Equifax, Experian, and TransUnion said in a joint statement.
“We believe that the removal of medical-collection debt with an initial reported balance of under $500 from U.S. consumer credit reports will have a positive impact on people’s personal and financial well-being,” they added.
U.S. consumers held a total of $88 billion in medical debt based on consumer credit records as of June 2021, the Consumer Financial Protection Bureau (CFPB) said in a report last March.
Most of the debt was below $500, but people have multiple “trade lines,” the report added.
“Data from the CFPB’s Consumer Credit Panel show that in 2020, the median medical collection was $310, the mean medical collection was $773, and 62% of medical collections were under $490,” the report stated.
This post was originally published on Market Watch
