Medical debt continues to be a major issue in the country, especially with so many people hospitalized during the coronavirus pandemic. Rob Michaelson and Betsy Badell explain why many Americans will have their medical debt dropped from their credit report.
What is Changing This Year
Rob: Since the pandemic began, medical debt has become more and more of an issue because people have been hospitalized for COVID, and there's a lot of bills that come with that. But Betsy, we actually have some good news when it comes to medical debt, right?
Betsy: Absolutely. It looks like the main credit bureaus have been a little bit more forgiving on consumers. They announced in a joint statement that they would remove nearly 70% of medical.
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Why This is Happening
Rob: That sounds amazing for anyone with medical debt. But why the sudden change?
Betsy: Well, this is because of a recent report by the Consumer Financial Protection Bureau, which found that medical debt collections were less predictive of future payment problems than other debt collections, such as car loans and mortgages. The report also said that Black, Hispanic and low-income individuals are more likely to have medical debt. Older people and veterans are also heavily impacted.
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What to Expect
Rob: So what are the details and when does this change happen?
Betsy: Well, going to expect to see a change beginning July 1. That's when state medical debt will no longer be included on the consumer credit reports. The credit bureaus also announced that in the first half of 2023, medical debts of less than $500 will not be added to consumer credit reports. This is great news, however, I've spoken to advocates that have pushed for this change in medical debt and credit reports, and they say that there's more work to be done because really, the big burden when it comes to medical debt is precisely when it comes to bills that are over $500.