Your Medical Debt Could Soon Disappear From Your Credit Report

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Talk about some good news for patients.


key points

  • Delinquent medical debt could result in a lower credit score.
  • Soon, that may not be a problem for many consumers thanks to an anticipated move by the three major credit bureaus.

Medical debt is a problem many consumers grapple with. That includes those who have health insurance — and in some cases, decent insurance at that.

The problem with medical debt, though, is that it can hurt consumers from a credit report perspective. For one thing, consumers commonly charge medical bills on credit cards and aim to pay them off over time. But too large a total credit card balance could result in credit score damage.

Plus, medical debt commonly shows up on consumer credit reports once collections agencies have to get involved. And that reflects poorly on consumers, making it harder for them to borrow when they need to.

But soon, that may not be as much of a problem. The three major credit bureaus just announced a positive change to the way they include medical debt on credit reports.

Bye bye, medical debt

In a joint statement, Equifax, Experian and TransUnion, the country’s major reporting bureaus, recently announced they will remove almost 70% of medical debt collection accounts from consumer credit reports. The change is coming as a result of several years of research and is set to take effect this summer.

Starting July 1, medical debts that were sent to collection agencies and eventually paid off will not have a place on consumer credit reports. Previously, those debts could show up for as long as seven years, even once settled.

Consumers will also be granted a one-year reprieve before unsettled medical debts appear on credit reports after being sent to collection agencies. That’s up from a six-month reprieve now. The purpose of that extension is to give consumers more time to work with their health insurance companies, negotiate with their providers, or just get current on their accounts.

Plus, beginning during the first half of 2023, Equifax, Experian and TransUnion will stop including medical debts on credit reports that are in collection but less than $500.

A positive change for credit reports

Even consumers who do a good job of managing their money and sticking to a budget can end up with medical debt. Falling behind on that debt often results in credit score damage. Once that occurs, borrowing for just about any purpose becomes more difficult.

Now, those with settled medical debt, or low levels of it, should not have to worry about a negative impact to their credit. And that could spare a lot of consumers a world of stress and heartache.

Recently, the Consumer Financial Protection Bureau reported that Americans had $88 billion in medical debt listed on their credit records as of June 2021. However, the agency also found that most of those individual debts were under $500. The aforementioned change could really spare most consumers from being negatively impacted by medical debt from a borrowing perspective.

Of course, it still pays for consumers to do what they can to avoid medical debt in the first place. That includes saving money for healthcare expenses, reviewing bills carefully for errors, and negotiating with providers in situations where insurance companies won’t pick up the tab. But the fact that the credit bureaus are getting more lenient with medical debt reporting is an unquestionably good thing.

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