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New changes for medical debt could help your credit score

The credit reporting industry recently changed the way medical debt is reported.

DALLAS — If you’re making medical payments and don’t pay off your bill, often the balance goes to third party agencies to manage collections. The agencies then typically report to the three credit bureaus -- Experian, Equifax, and TransUnion -- how much you paid or owe. 

However, the credit reporting industry recently changed the way medical debt is reported. This is great news for your credit score. 

There are two changes you need to know.

First, the Consumer Financial Protection Bureau told debt collectors and consumer credit reporting companies that they can’t collect, furnish, or report any invalid medical debt. 

Debt collectors now have to wait an additional 6 months to report medical collections to credit agencies. It used to be zero, then 6 months, but now it’s a full year. 

This 12-month period allows you more time to pay the debt and more time for your insurance policy to cover it. That way, the process goes through and there’s no need to get to collection status.

Secondly, according to credit expert John Ulzheimer, the credit reporting industry told companies that collect medical debt to not send medical collections unless they’re at least $500.

“And, the credit reporting agency retroactively deleted all medical collections from medical reports that were under $500. According to the industry, that eliminated about two-thirds of the medical collections on the consumer credit reports,” said John Ulzheimer.

Again, two-thirds of Americans will no longer have medical debt under $500 on their credit report. Ulzheimer believes this is huge for folks still reeling from the effects of the pandemic and inflation, and also rely on good credit to make big purchases like a house or a car.

So why is the credit reporting industry doing this?

“Let’s be real honest. The credit reporting and credit scoring industries are not at the top of the list as far as the favorite industries in the U.S. So, this is a good way for them to kind of improve their image become the good guy tuna fish company to make these changes that don’t really impact them that much,” said Ulzheimer.

Long story short: These are changes that will no longer impact your credit score if you don’t owe more than $50 and the bill is paid off within a year.

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