Be sure to mark July 1, 2022 on your calendar. It’s then when changes to Consumer Credit Reports will begin. Spurred on by reporting and bulletins by the CFPB, the three major Consumer Reporting Agencies will begin implementing substantial changes to credit reporting. Two changes are about report access, not on report data, they are:
- Extended, consumers will continue to be able to request free copies of their Credit Report from the bureaus through 12/22 on a weekly basis.
- Employment Eligibility is no longer a Permissible Purpose for accessing a Credit Report.
Those that directly involve the data in the report, and may have a material effect on your decision making, are as follows:
Delinquencies:
- Delinquent account reporting will now remain on a report for 4 years, down from 7 years.
- Delinquent accounts included in Bankruptcy shall remain for 7 years.
- Delinquent accounts due to COVID hardship may receive different treatment.
Medical Bills:
- Medical Debt that has been paid off in collection will no longer be included in report.
- Medical Collection Debt reporting time will be pushed from 6 months to 1 year.
- Medical Debt reports will only be those $500 or above.
Let’s explore the medical reporting in more detail.
Peterson-KFF Health System Tracker, 9% of adults — about 23 million people — owe a medical debt of $250 or more. About 1% of adults owe more than $10,000, and those bills represent most of the medical debt in the U.S.
As of June 2021, consumer credit records contained $88 billion in medical debt, according to the Consumer Financial Protection Bureau (CFPB). Most of those debts were less than $500.
The total amount of medical debt in the U.S. very likely exceeds $88 billion, as not all medical debt that is unpaid or in collections is reported to the credit agencies.
Change is happening.
Starting in the summer of 2022, some U.S. consumers will have medical debt dropped from their credit reports. That’s because most medical debt is the result of an emergency or one-time medical problem and doesn’t accurately reflect a person’s credit worthiness.
Beginning July 1, 2022, the credit reporting bureaus will wait 1 year before including medical debt in a credit report. Previously, the credit reporting agencies waited 6 months. The extra time gives people more time to pay medical bills or negotiate payments with healthcare providers or insurance companies.
Also starting July 1, 2022, paid-off medical debt won’t appear in consumer credit reports. Previously, medical debt — even if it had been paid — remained on a credit report for up to 7 years.
Equifax, Experian, and TransUnion also will stop adding medical debts of less than $500 to consumer credit reports starting January 1, 2023. Unpaid medical debt of $500 or more may still appear on credit reports.
Do medical bills affect your credit?
If you don’t find a way to pay your healthcare bill, the provider may sell your account to a collections agency. The business may be a law firm that collects debt. That is why ignoring a medical bill is never a good idea.
Debt collectors must reveal that they are trying to reach you to collect a debt. They may contact you in several ways, including by:
- Calling you on the phone
- Leaving you a voicemail
- Sending you a letter in the mail
- Contacting you via social media
Debt collectors have a dubious reputation for being aggressive in their efforts to make people pay, but consumers have some protections. Under the Fair Debt Collection Practices Act, it is illegal to harass or threaten someone while trying to collect a debt. As of November 2021, there are additional rules about how debt collectors may communicate with you and your rights in debt collection.
A healthcare provider may sue you for an unpaid debt. This legal action may have the following results:
- A civil judgment
- A lien against your property
- A court order to garnish your wages for repayment
While most healthcare providers won’t report your medical bills to a credit bureau, they may send the debt to a collections agency if you haven’t paid by a due date or negotiated a payment plan.
Debt assigned to a collection agency does not automatically appear on your credit report or affect your credit score.
Often, debt-collection agencies will report the unpaid amount to the consumer reporting agencies. Creditors are not required to report to every consumer credit agency and may not report to all three.
Debt-collection agencies may sue you in court, depending on state law and how aggressive they are about securing payment. If there is a lien or court judgment related to your medical debt, those public records may appear on your credit report.
Medical debt that is reported to a credit bureau can lower your credit score.
Even a single claim of outstanding debt sent to a credit agency can lower a good credit score 50 to 100 points. This hit to your credit score could include medical debt.
If you don’t find a way to pay your healthcare bill, the provider may sell your account to a collections agency. The business may be a law firm that collects debt. That is why ignoring a medical bill is never a good idea.
Debt collectors must reveal that they are trying to reach you to collect a debt. They may contact you in several ways, including by:
- Calling you on the phone
- Leaving you a voicemail
- Sending you a letter in the mail
- Contacting you via social media
Debt collectors have a dubious reputation for being aggressive in their efforts to make people pay, but consumers have some protections. Under the Fair Debt Collection Practices Act, it is illegal to harass or threaten someone while trying to collect a debt. As of November 2021, there are additional rules about how debt collectors may communicate with you and your rights in debt collection.
A healthcare provider may sue you for an unpaid debt. This legal action may have the following results:
- A civil judgment
- A lien against your property
- A court order to garnish your wages for repayment
If you cannot afford to pay a medical bill, you have options. It’s very important for you to take action before your account is overdue or has been sent to collections and adversely affecting your credit report and score.