Three of the biggest credit companies are expected to change their reporting process this summer.
It could free millions of people from debt.
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How will my credit report be impacted?
Even though millions of Americans have health insurance, medical bills can add up quickly and be debilitating. The three largest credit reporting companies, Equifax, Experian and TransUnion, all announced that in July, debt from medical collections would not be included in consumer credit reports. Learn more here.
This new rule will essentially erase 70% of consumers’ medical debt information from their credit reports.
You will also have a full year before your unpaid collection debt appears on your consumer report. It was previously only six months.
The extension was designed to give consumers more time to work with their insurance or healthcare providers to settle their debt before it is reported.
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How will this help me?
Starting in 2023, Equifax, Experian and TransUnion will not include medical collection debts under $500 in credit reports.
The Consumer Financial Protection Bureau (CFPB) has called on companies to change the way they report. The CFPB reports that Americans have between $81 billion and $140 billion in medical debt.
The US census revealed that 19% of households cannot afford to pay their medical bills. About 1 in 10 Americans, or about 23 million people, have medical debt starting at $250.
Medical debt can stay on your credit report for up to seven years. The debt remains on the report whether you have paid it off or even changed status.
Once your debt is taken care of, your credit score is heavily impacted.
The change is intended to allow Americans to focus on their recovery rather than their bills.