Medical debt has long played an important role in credit reporting, but concerns about medical debt collection and related reporting are becoming particularly high due to the COVID-19 pandemic.
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Some degree of medical debt relief is in sight, however, as the three largest credit reporting companies will soon begin removing tens of billions of dollars of medical debt from consumer credit reports, reducing borrowing difficulties and improve the credit scores of millions of Americans. , according to the Wall Street Journal.
Equifax, Experian and TransUnion are set to change the way medical debt is reported. The first changes are expected to take effect in July and are expected to eliminate nearly 70% of medical debt in credit report collection accounts.
Credit reporting companies will remove medical debt that has been paid from credit reports after it has been sent to collections. Under current procedures, such debts can weigh on a credit score for up to seven years, even if they are already paid.
Under the new approach, new unpaid medical debt will not be added to credit reports for a full year after being sent to collections. Additionally, the three credit-monitoring agencies will write off all outstanding medical debt under $500 in the first half of next year, with the possibility of that threshold increasing, The Wall Street Journal reported.
Because medical bills are expensive and often result from unforeseen circumstances, medical debt is the most common type of debt reported on consumer credit reports in the United States. As noted in a report on the burden of medical debt in the United States – a report published by the Consumer Financial Protection Bureau and published on March 1 – those contacted by collection agencies are contacted more often about the medical debt than any other type of debt.
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This move by Equifax, Experian and TransUnion could have a real impact on people struggling with past medical debt and subsequent poor credit by the end of the summer.
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