Got Medical Debt? Your Credit Score May Have Increased – Here’s Why
For many Americans, medical debt has been a heavy burden, one that often negatively affects their credit scores and by extension, their ability to access financial loans, housing, and even employment. However, recent changes mean that some individuals may have seen an unexpected yet welcome boost in their credit scores. Let’s delve into why this is happening.
Firstly, the three major credit bureaus—Equifax, Experian, and TransUnion—have announced that they will be changing how medical debt is reported on consumer’s credit reports. As of July 1, 2022, the grace period for unpaid medical bills that are in collections has been extended from six months to a full year before they appear on your credit report. This extension gives consumers more time to resolve their debt before it impacts their credit score.
Furthermore, starting in the first half of 2023, the credit bureaus will no longer include medical debt in collections that has been paid off. In the past, paid-off debts could stay on your report for up to seven years, affecting your score despite having settled the bill. This change reflects a more accurate representation of your current financial situation.
Additionally, in a united front to reduce the burden of medical debt on Americans’ credit history, by July 2023, Equifax, Experian, and TransUnion will also stop reporting medical collection debt under $500. This is significant because small amounts of debt can disproportionately impact credit scores—and often represent minor billing disputes rather than an individual’s actual creditworthiness.
The ripple effect of these changes could be quite substantial. Many consumers will see a rise in their credit scores when these debts are either delayed in reporting or removed altogether. An improved credit score can unlock numerous opportunities including better interest rates on loans and mortgages which translates to long-term savings. Additionally, with higher scores offering greater borrowing power and financial flexibility many individuals may find themselves in a stronger position for future planning and investments.
While these changes won’t eliminate the issue of medical debt altogether they signal a step towards more empathetic reporting practices acknowledging that medical expenses are often unpredictable and can represent financial anomalies rather than typical spending or borrowing behaviors—a win for consumer rights and financial health.
If you’ve recently seen an increase in your credit score it might be due to these changes surrounding medical debt reporting. It’s always a good idea to regularly check your credit report to understand your financial standing and take advantage of information like this that could positively impact your life.