Medical Debt Credit Reporting Changes in 2022
It's 2022 And Medical Debt Credit Reporting Policy Is Changing
On March 1, 2022, the Consumer Federal Protection Bureau released a report calling attention to the complicated nature of the U.S. medical billing system. The report states that the U.S. healthcare system is "supported by a billing, payments, collections, and credit reporting infrastructure where mistakes are common, and patients often have difficulty correcting these errors."
CFPB officially confirmed that roughly 60% of all bills in collections during the second quarter of 2021 were medical debt, and they amounted to $88 billion which counted against Americans’ credit scores.
Once a medical debt goes to collections, it will likely damage your credit score and can easily reduce your it by over 100 points. These debts are serious and can remain on your credit report for seven years, just like other debt related problems that go unpaid.
Further research has shown that these debts can cause a snowball-effect; additional stress and high blood pressure which can cause worsening health and lead to even more medical debt. For this reason, CFPB confirmed past-due medical bills are not a reliable indicator of how responsible the consumers are when paying on time other bills, such as mortgages, car loans, or credit cards.
On Friday, March 18, 2022, the Experian, TransUnion, and Equifax CEOs confirmed that they are changing their policy regarding reporting consumers' medical bills.
The three credit bureaus announced that starting July 1, 2022, paid medical bills will be no longer be included in credit reports and can't be counted against consumers applying for new loans. Medical debts less than $500 will be not be included in credit reports altogether. Additionally, unpaid medical debt exceeding $500 will appear in one year instead of six months.
This sprawling move will wipe an estimated 70% of Americans' medical debt off consumers' credit reports starting July 1, 2022. The policy change is undoubtedly a relief for many Americans, especially the elderly and those with serious health issues, and even moreso during the covid pandemic.
The agencies stated that they intended to "help people across the United States focus on their financial and personal wellbeing and recovery,” as one in five American households currently report having at least some form of medical debt in collections. In other words, the new policy changes will support roughly 20% of U.S. consumers who unfairly have less housing and other credit options, or may have trouble getting unemployment checks during these challenging times.
Medical bills and past-due healthcare expenses can and will affect your credit ratings if left in default. It's wise to understand how to prevent this, and one small step is having a better understanding of how your credit score is calculated.
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