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Medical Debt and Credit Scores: How New Rules Ease the Pain

As of July 1, billions of dollars of medical debt are now removed from Americans' credit scores.

An illustration of a woman chained to a box of medical supplies
Medical debt for adults younger than 30 is twice as common as for adults older than 65.
sorbetto/Getty Images

Medical debt is now as American as apple pie -- more than half of US adults say they've gone into debt from medical or dental bills in the last five years, according to a new Kaiser Family Foundation survey. A quarter of those adults owe more than $5,000 and almost 20% say that they don't expect to ever pay off their medical debt.

While the medical debt situation seems bleak, there's a small bright spot for those with late medical bill payments that have damaged their credit scores. As of July 1, the three major credit bureaus -- Equifax, Experian and TransUnion -- will now remove all medical collection debt that has been paid from their credit reports. In a March 2022 announcement, the bureaus noted that this rule change removes 70% of medical collection debt from consumer credit scores. Previously, collections would stay on file for seven years, regardless of whether or not the debt was paid.

Along with the removal of paid medical collection debts, the credit agencies will now give Americans one year to address outstanding medical bills before they're added to their credit reports. Also, in the first half of 2023, the credit bureaus plan to remove and no longer report all medical collections debt under $500. 

The Consumer Financial Protection Bureau has said it's examining how the credit bureaus use medical debt on their reports and whether it's appropriate for unpaid medical billing data to be included on credit reports. "Certain populations are more likely to incur medical debt," the CFPB noted in a report (PDF). These populations include lower-income individuals, Black people, veterans, young adults and older Americans.

We'll explain what you need to know about the changes for medical debt reporting, including how you can confirm that paid medical collections debts have been removed from your credit reports.

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How does unpaid medical debt now impact credit reports?

Unpaid medical debt is usually handed over to a collection agency after 60 to 120 days of delinquency. From there, the main credit bureaus will now extend a year-long grace period for consumers to address the debt -- either pay in full or negotiate with their insurance or the collections agency -- before adding it to a credit report as a collections account.

Prior to July 1, the old grace period was about half a year, or 180 days, and all collections would stay on consumer credit reports for seven years. The new rule changes mean that paid medical collections debts will be removed from credit scores, though unpaid medical collections debt will still stay on your credit record for seven years. 

When was paid medical collection debt removed from credit reports? 

As of July 1, paid medical collection debt should no longer be included on consumer credit reports for the three credit reporting agencies. The United States Public Interest Research Group encourages Americans with prior medical debt collections to check their reports to confirm that paid debts have been removed. 

Another change will also go into effect in the first half of 2023. Equifax, Experian and TransUnion have said that any medical collection debt below $500 will no longer be included on credit reports. Most medical collection debt on credit reports is under $500, according to the CFPB (PDF).

How can I confirm my paid medical debt has been removed from my credit report?

The three major credit bureaus have been offering free weekly online credit reports ever since the start of the COVID-19 pandemic. You can get your own credit report weekly at AnnualCreditReport.com. (Before the bureaus started offering free weekly reports, Americans were allowed one free credit report per year.)

Once you've downloaded your reports, carefully look through each to find any notices of collections for paid medical debt. Specifically look for sections labeled "Collections" or "Account Information."

If you do find paid medical debt still cluttering up your credit score, you'll need to dispute any items with each of the credit bureaus separately. Follow the links below to each bureau's page for filing disputes.

How will these changes impact my credit score?

Having a debt go to collections can drop your credit score significantly -- and it gets worse the longer it hasn't been paid. For instance, your credit score is likely to drop more if a bill has gone unpaid for 150 days versus 30 days.

Once a collection has been removed from your reports, you could see a positive change in your credit scores. The impact on your credit score will depend on how many collection accounts you have. If your only collections account is removed from your report, your score could rise as much as 150 points, according to credit repair company Credit Glory.

For more financial information, here are the best credit monitoring services. Also, here's how you can save money at the gas pump and while shopping.