by Eva Marie Stahl, Vice President, Public Policy, Undue Medical Debt
Earlier this month, the major credit agencies announced that they will no longer include medical debt on people’s credit reports. This announcement comes shortly after the Consumer Financial Protection Bureau (CFPB) report signaled growing government interest in mitigating harm for people struggling to pay their medical bills.
The action taken by the largest three national credit reporting agencies (NCRAs) — Experian, Equifax and TransUnion — will do three main things:
- Starting July 1, paid medical collection debt will no longer be included on consumer credit reports. These debts can show up on credit reports for up to seven years.
- People will have one year to settle medical bills before unpaid medical debt appears on their credit report. This is a change from six months, the typical practice.
- Beginning midway through 2023, medical debt less than $500 will no longer be included on credit reports.
This news is welcome — the decision, according to the NCRAs, will eliminate 70 percent of debt from credit reports. The announcement, however, lacks necessary detail. It is not yet clear how the $500 threshold will be calculated — is it a single bill of trade line? or is it a set of bills for a single health event? The specifics have yet to be outlined by the credit agencies.
To be clear, removing medical debt from credit reports does not solve the medical debt crisis for millions of people nationwide who cannot afford to get the health care they need. Ending the practice of penalizing a credit score due to medical debt removes insult to injury by not piling on to what is an already stressful experience. It is important to note that even though medical debt is no longer on credit reports, it remains a challenge for people and causes harm. The calls from debt collection entities do not stop and the bills do not stop piling up just because the debt is not reported to a credit agency. The experience of medical debt — from bills to debt collector calls — generates tremendous harm and disproportionately affects low-income people and people of color. Second, medical debt remains elusive. When in the middle of a health crisis, people borrow money to pay their bills — this includes using credit cards that typically have high interest rates and other types of loans. Solving medical debt is not about ignoring it or hiding it in other debt vehicles, it is about getting to the root of it and ensuring that no one skips care or loses their economic security in order to access health care.