Quick background for those joining the party late: Roughly 20% of U.S. households admit they have medical debt. Worse still, 58% of the bills that are in collections on people’s credit reports are medical bills. Given how many medical procedures were delayed or deferred during the pandemic, both costs and medical debt is expected to continue to expand.
Finally, there is good news for anyone who has medical debt or just worries about Americans’ financial health like I do. All three credit bureaus announced three huge changes to how medical debt is handled on people’s credit reports:
As of July 1, 2022, all paid medical collections debt will be removed from consumers' credit reports
Unpaid medical debt will now take a full year (rather than six months) to appear on a credit report
Lastly, starting in 2023, any medical debt under $500 will no longer appear on credit reports at all
What does this actually mean for someone with paid medical debt? It means they could see their credit score rise by 50-100 points overnight! This move by the credit bureaus and the recent No Surprises Act, which targets unlawful and unexpected medical bills, will do wonders for Americans’ financial health, as well as their actual physical and mental health too.
Individuals with poor credit are shown to be more stressed, delay or avoid medical care more often, and overall have worse health outcomes throughout their lives. While credit reporting is a linchpin of our financial system today, punishing people for past medical problems and the often astronomical costs that come with them is wrong. If you paid your medical debts, you rightly should be free of the burden on your credit report. Don’t make people relive and pay for their own or their family’s cancer care for years after they actually paid for it.
I applaud the credit bureaus for doing the right thing and owe some credit to the CPFB for the work they likely put in on this one.
[If you want to learn more about managing your own credit score, find more resources HERE]