The major credit reporting agencies are making changes to the way that they consider medical debt. The adjustments, which will begin this summer, will affect the credit reports of millions of Americans.
Equifax, TransUnion and Experian have announced that they will start excluding certain types of medical debt from credit reports. The agencies say this will remove more than 70% of healthcare-related debt from credit reports.
Here Are the Major Changes Coming to Your Credit Report
- Paid Medical Collection Debt: Medical debts that went into collections but eventually were paid will no longer show up on consumers’ credit reports.
- Unpaid Medical Collection Debt: The time frame before outstanding medical collection debt shows up on a consumer’s credit report will be extended from six months to one year.
- Medical Collection Debt Under $500: The bureaus say they’ll no longer include medical debt collection accounts under $500 on credit reports.
Now let’s get into each of these changes to learn more, including when they will take effect.
Paid Medical Collection Debt
Effective Date: July 1, 2022
Let’s say you got behind on a medical bill, but eventually got around to paying it but not after it went to a collection agency.
Such an ordeal would typically ding your credit, hurt your borrowing abilities and reduce your purchasing power.
With the change, paid medical collection debt won’t be included on your credit report at all.
Unpaid Medical Collection Debt
Effective Date: July 1, 2022
Instead of the current six-month grace period, you’ll have up to one year before any unpaid medical debt is included on your credit report.
The bureaus say this change will give people “more time to work with insurance and/or healthcare providers to address their debt before it is reported on their credit file.”
Medical Collection Debt Under $500
Effective Date: The first half of 2023
Medical debt accounts under at least $500 will no longer be included on consumer credit reports starting sometime next year.
According to one study, in June 2020, Americans had a mean medical debt of $429, which was nearly $40 more than the combined average of all other non-medical debts.
Of all the changes announced, this one is likely to benefit the most people. A report from the Consumer Financial Protection Bureau (CFPB) says that, in 2020, 62% of medical collections were under $490.
With that said, if you’re in medical debt, here are some steps you can take to help remedy the situation.
How To Get Rid of Medical Debt
Renegotiate Your Bill
Money expert Clark Howard says renegotiating your medical bill can make all the difference, especially for those without health insurance.
You can do this by contacting your medical provider and asking them for the cash price, Team Clark’s Theo suggests.
“The reality is that cash is king. Medical billing offices are already fatigued with all the insurance companies,” Theo says.
Clark recommends that you have a specific number in mind when trying to lower your medical bill.
“You want to push really hard to negotiate for around 20 cents on the dollar,” Clark says. “That’s about what a traditional health insurer would pay versus retail.”
Ask for an Itemized Bill
It’s no secret that medical bills can be hard to decipher. That’s why it’s a good idea to ask for an itemized bill from your health care provider so that you don’t end up paying for a service you didn’t get or paying too much.
An itemized bill will show you descriptions of each charge so that you can see clearly what each line is for.
Medical billing errors are common. Here’s a list of the errors that pop up frequently.
You can ask for one before your procedure as well as after the procedure to track any errant costs.
Want more suggestions? Here are more ways to deal with medical debt.