Millions of Americans carry medical debt. According to the Consumer Financial Protection Bureau, most people owe hundreds or thousands of dollars in medical bills. Owing this much can be financially devastating for individuals, affecting everything from where they live to whether they can borrow money.
Thankfully, there could be some relief on the way, thanks to planned changes to how medical debt affects credit reports.
Removing 70 percent of medical collection debt
Reports state that credit reporting agencies including Experian, Equifax and TransUnion will change medical debt reporting in a few critical ways.
- They will no longer include medical debt in collections if it is under at least $500.
- They will remove medical debt sent to collections if borrowers already paid it off instead of letting it stay on a credit report for as long as seven years.
- They will not add new unpaid debts until after being in collections for a year, which is an increase from the current timeline of six months.
These changes will effectively remove about 70 percent of medical debt sent to collections from consumers’ credit reports. This adds up to tens of billions of dollars of debt removed from reports, which would increase millions of people’s credit scores.
Consumers can expect to see these changes going into effect in July.
How these changes can affect individuals
Too often, people assume debt stems from irresponsible spending. However, that is not true for millions of borrowers who wind up buried under medical debt through no fault of their own. Anything from a car accident to pregnancy or a severe illness can require extensive – and expensive – medical care.
The cost of going to the hospital in the U.S. can be enormous, even for people with health insurance. And it does not take much to wind up owing thousands of dollars that a person never planned to spend.
These changes can alleviate the toll that medical debt takes on a person’s credit report, making it less expensive to borrow money and get insurance, among other benefits of having a higher credit score.
That said, debt can still prove to be unmanageable for borrowers. Under these circumstances, individuals can discuss debt relief options with attorneys at the Quinn Law Firm by calling 814-806-2518.