Credit Reports to Stop Reporting Billions of Dollars in Medical Debt

By Keith Rucinski, Akron, OH
Chapter 13 Trustee

One of the largest delinquent accounts on credit reports is unpaid medical debt. According to the Consumer Financial Protection Bureau, credit reports reflect unpaid medical debt of nearly $88 billion. Credit reports play a large role in everyone’s life and its important that your credit report is as positive as possible. 

Lenders use credit reports in making decisions to extend credit to potential borrowers.   A credit report that includes past due accounts and accounts in “collection” status can cause a person to be denied credit.  Denial of credit for a loan can result in individuals being unable to purchase a home or car, or being approved for a credit card.   If approved for a loan, a credit report with delinquent accounts can cause the borrower to pay much higher interest rates on the loan.

In addition to lenders, employers also use credit reports in doing background checks for potential hires.   Landlords use credit reports to screen potential tenants.   A credit report with past due accounts can result in loss of employment opportunities or the ability to rent a place to live.

Medical debt often ends up being on credit reports due to misunderstanding or miscommunication on what insurance has paid (or denied) and that the individual is responsible for the remaining balance.   It is imperative for individuals to understand their insurance and review their insurance benefit statements carefully.

Starting in mid 2022, the three largest credit reporting firms – Transamerica, Equifax, and Experian, have voluntarily agreed to stop reporting past due medical debt on credit reports,  under certain circumstances.

Those circumstances include:

The medical debt is less than $500.

The medical debt has been unpaid more than one year.

(the prior policy allowed reporting if the medical debt was unpaid for six months)

The medical debt has been paid.

It is projected that these changes will remove billions of dollars from credit reports.

To make sure medical debt has been removed from credit reports, individuals should review their credit reports every 12twelve months and report any errors.

Individuals are entitled to one free credit report every 12 months.   Note:  This is not once a year, it is 12 months.  If a report is requested today, a person is not entitled to another free report for 12 months from today.

One site to obtain free credit reports is AnnualCreditReports.com.

There are a lot of bogus sites which try to charge fees for credit reports.  Individuals are advised to never give credit card or bank account information to obtain a free credit report.

Eliminating medical debt from credit reports will help many individuals qualify for better house and car loans,  employment opportunities, and lease a place to live.