Your credit report could see a boost due to the changes.
INDIANAPOLIS — Medical bills from an unexpected incident can cost you thousands of dollars.
If you are unable to pay it, this debt can haunt you for years.
Now, changes are coming to the way medical collection debt is reported.
Medical Recovery Debt: Is It Different?
Bankrate.com’s Ted Rossman said studies suggest your inability to pay a big medical bill doesn’t accurately reflect your overall borrowing habits.
“Your credit score is really meant to be a kind of financial report card. It’s supposed to predict the likelihood that you’ll pay off lenders. Medical debt is kind of apples to oranges when it comes to those monthly bills, like your credit card. credit, your car loan, your mortgage,” Rossman said.
That’s part of the reason Experian, TransUnion and Equifax are making big changes to how they handle medical debt collection.
RELATED: Your Credit Score Could Soon Rise
Starting in July, repaid medical collection debt will be removed from credit reports.
Currently, it can last up to 7 years.
As for unpaid medical debts in collections, it will take longer to appear on your credit report – One year, instead of six months.
RELATED: What’s the deal: Saving money on groceries
“It has a lot to do with this tangled web of insurance,” Rossman said. “Maybe it wasn’t your fault.”
The final change taking effect in 2023 is that the bureaus will no longer put medical collection debt under $500 on your credit report.
Credit reporting agencies say these measures will remove nearly 70% of medical collection debt accounts from credit reports.
Although these updates should happen automatically, request your credit reports and check anyway.
Future medical bills
If you know you have an expensive procedure coming up, discuss with your supplier how you will pay for this.
Treat it almost like car financing. Does the medical group offer an interest-free payment plan? If not, what are personal loan rates like?
Don’t automatically put it on a credit card, as that’s often the most expensive debt. Rossman said if you put medical bills on your credit card, then they are reclassified as credit card debt and not medical debt.