Medical Debt Reporting Should Ease Harm to Personal Credit Scores

By Isaac White.

There is help on the horizon for those of you who are among the numerous people who have looming medical obligations on their credit reports. Beginning on July 1, 2022, the three main credit bureaus, TransUnion, Equifax, and Experian, will no longer include paid-off medical debts in the credit reports of individual customers.

The Kaiser Family Foundation published their findings of an analysis they conducted on data obtained from the Survey of Income and Program Participation in order to gain an understanding of the number of people who have medical debt and the amount of money that they owe. They discovered that 23 million people, which is roughly one out of every ten adults, have considerable amounts of medical debt.

According to the findings of a 2019 study on household medical debt conducted by the Census Bureau, 17% of families in 2019 had outstanding medical debt. As of June 2021, a report compiled by the Consumer Financial Protection Bureau revealed that nearly 43 million individuals have medical bills included on their credit records.

Information compiled by Lending Tree in a survey on medical debt found more demographic-specific data. Per reporting of their data, Lending Tree found the likelihood of having outstanding medical bills is highest among millennials. According to the survey conducted by LendingTree, only 13% of baby boomers claim to have it, while 24% of Generation Xers, 22% of Generation Z, and 30% of millennials have medical debt.

When compared to parents of older children or people who do not have children at all, parents of younger children have a significantly greater rate of medical debt. According to the poll conducted by LendingTree, thirty percent of parents with children under the age of 18 have medical debt. This compares to only twenty percent of individuals who do not have children and nineteen percent of those who have only adult children.

Higher earners are half as likely as lower earners to have medical debt. According to the LendingTree poll, 14% of those who earn $100,000 or more a year report having medical debt, compared to 28% of people who earn $35,000 or less annually.

Medical providers normally do not disclose unpaid medical bills to credit reporting organizations. The majority of outstanding medical bills are eventually turned over to debt collection agencies, which subsequently report to the major credit reporting agencies.

As people nationally and locally are aware of and have personal experience with, having a lot of debt from medical expenses may have a significant and detrimental effect on your personal finances. In particular, it can bring about a significant drop in your credit score and result in a difficult financial situation personally.

It is estimated that medical bills account for 58% of the debt being collected and that is being reported on people’s credit reports.

Alterations to the way medical collection debt is reported on credit reports started taking effect in 2022 and will continue doing so in 2023. The three nationwide credit reporting companies, Equifax, Experian, and TransUnion started deleting settled medical bills from individuals’ files beginning on July 1, 2022.

“For some people, it could lift their credit score 100 points or more, somebody who otherwise had really good credit and is dragged down by this one instance of medical debt,” Ted Rossman, Bankrate.com senior industry analyst, told Yahoo Finance Live.

Unpaid medical collection bills won’t show up on people’s credit reports until a year after the due date of the bill has passed, giving them an additional opportunity to settle the matter.

During the first half of 2023, all medical collection debts with balances under $500 that were previously recorded will be removed from credit reports. The Consumer Financial Protection Bureau conducted an examination and reported that a lack of openness in the system can cause uncertainty concerning medical billing.

“Even when a patient tries to battle to get an accurate bill, or an insurance claim paid, medical debt collectors have a weapon that is hard to fight against: the credit report,” Rohit Chopra, director of the CFPB, said in a statement. “I am concerned that the credit reporting system is being weaponized as a tool of coercion to get people to pay medical bills they may not even owe.”

If you have medical bills that have not been paid, you have options available to you. For instance, verify your health insurance coverage twice to confirm that your provider has paid for everything that falls under their responsibility. The next step is to make a request for an itemized bill as well as an internal review. Next, you should file an appeal for any claims that your insurance company has rejected. Finally, make an effort to devise a method of payment that is within your financial means.

Although it doesn’t cancel out those obligations or delete all medical debt from credit records, this is still wonderful news for many. This summer, consumers who have paid off their medical obligations but still have negative marks on their credit report should expect some relief. People are urged to remember they need to check with the credit bureaus to confirm any medical debts they have on their credit report are removed in accordance with this new voluntary move.