Key Takeaways

  • Three major credit reporting agencies—Equifax, Experian, and TransUnion—are removing most medical debt from credit reports starting in July.
  • The change may provide relief to Americans who are dealing with financial consequences from incurring medical debts.
  • Experts applaud the change, but say changes from credit reporting agencies alone are not enough to alleviate healthcare costs.

The three nationwide credit reporting agencies—Equifax, Experian, and TransUnion—said they will change the way they report medical debt on consumers’ credit history starting in July.

The agencies will remove almost 70% of medical collection debt from credit reports. They will also double the grace period from six months to a year before unpaid debt would appear on a report. Unpaid medical debt of less than $500 will no longer show up on reports in the first half of 2023, the companies said.

Experts say the move may alleviate some financial distress caused by surprise medical bills, but is unlikely to rectify the unaffordable healthcare system in the United States.

“A poor credit report because of health care can limit people’s ability to just live a normal life,” David Berg, president and cofounder of Redirect Health, told Verywell.

Systemic problems in the healthcare system, including costly medical treatments, faulty billing, and a lack of financial transparency provide a need for change, he added.

The High Price of a Healthy Life

Medical debt is a major source of debt for Americans. Around 20% of U.S. households report having medical debt, according to a 2022 report released by the Consumer Financial Protection Bureau (CFPB). This issue is more prevalent among Black households, with 28% reporting to have past-due medical debt.

“Medical collections debt often arises from unforeseen medical circumstances. These changes are another step we’re taking together to help people across the United States focus on their financial and personal wellbeing,” according to a joint statement by the CEOs of Equifax, Experian, and TransUnion.

A poor credit report can have ripple effects on someone’s ability to make substantial life investments like buying a house, qualifying for insurance, or opening a bank account.

People who have or who are at risk of having medical debt may also avoid seeking out necessary medical care, according to the U.S. Census Bureau.

How Can Medical Debt Affect Someone’s Credit Score?

If healthcare providers fail to collect the debt, they often send the account to a third-party collection agency, which then reports the unpaid balances to credit bureaus, according to CFPB.

But when someone uses a credit card to pay off a pricey medical bill, then struggles to pay off the balance afterward, it can still lower their credit scores dramatically.

“A lot of people think of medical debt as debt owed to medical providers,” Lunna Lopes, a senior survey analyst for the Kaiser Family Foundation (KFF) Public Opinion and Survey Research team, told Verywell. “But one thing that we should keep in mind is that a lot of people might pay their medical bill with their credit card—now they owe the credit card.”

This could lead to some patients being stuck in a vicious cycle of poor health and unaffordable care. Based on a 2019 survey by Peterson and KFF, people struggling with health problems and financial insecurity may also be most in need of medical care.

According to the survey, 38% of people with “fair” or “poor” health had medical debt. People who had lower household incomes were also more likely to owe medical debt.

Credit Score and Insurance Coverage

Sometimes, poor credit scores may prevent people from getting certain types of insurance policies that cover specific medical treatments or procedures, according to Michael Jan Baldicana, who works for Pyramid Credit Repair, a company that helps people repair defects in their credit record.

“The underlying reason for this is that health insurers are risk-averse and want to avoid paying claims that will be difficult to recover from,” Jan Baldicana wrote in an email to Verywell.

A KFF poll from 2019 found that about a quarter of adults without insurance said difficulty affording medical payments had a major impact on themselves and their families, compared to 12% of adults with insurance. KFF also found that people who had lower income or who had chronic medical conditions were among the most likely to report that their medical debt had negative impacts on them or their families in 2019.

Berg said removing medical debt from credit scores will not make health care affordable, but it will reduce or delay the consequences of a missed payment. “I applaud that we’ve taken medical debt out of the credit rating system,” he said. “It never should have been there in the first place.”
What This Means For You

Starting July 1, 2022, Equifax, Experian, and TransUnion will be making changes to the way they record medical debt on credit reports, including dropping records of paid medical debt.


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