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Credit agencies changing the way they track medical debt

Medical debt
Posted at 2:23 PM, Mar 22, 2022

About 20% of U.S. households say they have medical debt, and during the pandemic, the issue got even worse — especially among Black and Hispanic Americans.

Not only are millions of Americans in medical debt, but the Consumer Financial Protection Bureau also says more than $88 billion of that debt is reflected on credit reports.

"Medical debt, even though it's less predictive of how credit-worthy you are, it still can harm your credit score," said Jen Bosco, a staff attorney at the National Consumer Law Center.

The good news is that the three national credit reporting agencies will be removing some of that debt starting July 1. Equifax, Experian and Transunion say medical debt people have paid will no longer be included on the reports.

Currently, medical debt still shows up on credit reports, even if a person has paid an overdue bill. Beginning in July, credit agencies will increase the time before unpaid medical debt appears on your credit report from six months to a year. They'll also no longer include medical debt of less than $500 on credit reports starting next year.

For now, experts like Bosco say there are steps people can take to improve their credit scores.

"For a medical debt, you can go back to the health care provider or the debt collector and try to work out an arrangement with them where you maybe agree to a new payment plan, but, in exchange, they will help you clear your credit report," Bosco said.

People can dispute any inaccurate medical debt information on a credit report with a credit bureau.

There are also ways to pay medical bills before they appear on credit reports. Hospitals are required to offer financial assistance to patients, but they don't always do a good job of letting them know it's an option. Experts recommend asking hospitals about financial aid if the information isn't available on their website.

"Talking with the healthcare provider, talking with the financial office and seeing if you can negotiate a lower payment, maybe they'll work out a payment plan with you at a lower amount if you make prompt payments," Bosco said.

Attorneys recommend that anyone who does pay off medical debt should avoid using a credit card if they won't be able to pay off their balance that particular month because at that point, the medical debt will become credit card debt.