(NEXSTAR) – Many Americans who have seen their credit score take a hit because of medical debt could soon see relief.
Effective July 1, three of the nation’s largest credit reporting agencies – Equifax, Experian, and TransUnion – will stop including paid medical collection debt. Currently, that debt can remain on your record for seven years, CNBC reports.
Additionally, the agencies have agreed to extend the time period before unpaid medical collection debt appears on a consumer’s credit report from six months to one year. Starting next year, medical collection debt under $500 will no longer appear on credit reports from Equifax, Experian, and TransUnion.
These changes are expected to remove almost 70% of medical debt tradelines from consumer credit reports, the agencies said in a joint statement earlier this year.
A recent report from the Consumer Financial Protection Bureau found an estimated $88 billion in medical debt collections appears on consumer credit reports as of early 2021. Medical collections were found on 43 million credit reports, according to CFPB.
When medical bills appear on credit reports, consumers may find themselves at an increased risk of bankruptcy, avoiding additional medical care, or struggling to secure a job, CFPB explains. The debt can also lower your credit score, making it harder to get approved for loans, other credit, or better interest rates, CNBC reports.
“Medical collections debt often arises from unforeseen medical circumstances. These changes are another step we’re taking together to help people across the United States focus on their financial and personal wellbeing,” Mark W. Begor, CEO Equifax; Brian Cassin, CEO Experian; and Chris Cartwright, CEO TransUnion said in a joint statement. “As an industry we remain committed to helping drive fair and affordable access to credit for all consumers.”
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The Biden administration has also made recent changes to tackle medical debt. In April, they announced reforms to reduce or eliminate medical debt as a factor in government lending decisions.