Credit Reporting Agencies Will Start Removing Most Medical Debts

The three largest credit reporting agencies will start removing medical debt from consumers’ reports beginning in July in a move that over time will result in the elimination of close to 70% of healthcare arrears in collections, The Wall Street Journal reported on Friday (March 18).

For the past few months Equifax, Experian and TransUnion have been working on changes to how they report outstanding medical liabilities, which can stay on consumers’ credit reports for up to seven years after the debt is paid.

The first change that starts in July is the elimination of paid-off arrears after the debt was sent to collections. New unpaid medical debts that are sent to collections won’t be added to credit reports for a year.

“This is an important step to support consumers in the wake of the Covid-19 pandemic,” the credit reporting agencies said in a joint statement. “These changes reflect our ongoing commitment to helping facilitate access to fair and affordable credit for all consumers.”

In the first six months of 2023, Equifax, Experian and TransUnion are also planning to strip unpaid medical debt under $500 from credit reports. The dollar amount could rise, sources with insider information told the WSJ.

Read more: Credit Bureaus’ Medical Debt Move Spotlights Affordability Issues

An estimated $88 billion in medical debt is on 43 million credit reports, according to the Consumer Financial Protection Bureau (CFPB). The three agencies manage credit reports for over 200 million people in the U.S.

Part of the effort by the credit reporting firms is to satisfy the CFPB, the sources told the WSJ. CFPB Director Rohit Chopra has made credit reporting a prime concern and said he will hold credit reporting agencies accountable for dragging their feet on taking action against companies that report inaccurate medical debt.

“They are responsible for guarding against contamination of the credit reporting system with unsubstantiated and inaccurate reports of debt allegedly owed,” Chopra said in a press release earlier this month.

“If furnishers, whether of medical debt or otherwise, are polluting the system with inaccurate information, we will expect the Big Three to cut off their access to the credit reporting system,” Chopra said.