The nation's largest credit reporting bureaus announced Friday that a significant number of Americans will see their medical collection debt removed from their credit reports.
Equifax, TransUnion, and Experian announced in a joint statement that they will remove almost 70% of the debt. This was after months of industry research which revealed roughly two-thirds are the result of one-time or temporary medical expenses stemming form an "acute health need", a news release stated.
"After two years' worth of the Covid-19 epidemic and a thorough review of the prevalence medical collection debt on credit report, the NCRAs have made changes to help people focus on their personal well-being and recovery," they said.
Consumer credit reports will no longer include paid medical debt starting July 1. Credit bureaus announced that consumer credit reports will no longer include medical debts less than $500 in the first half 2023.
The time period between unpaid medical collection debt appearing on a credit card report will go up from six months to one year. This change is intended to give consumers more time to work together with their medical providers and insurance companies to pay the debt.
The Consumer Financial Protection Bureau's February report found that medical debt collection were less predictive of future payments problems than other debt collections, such as mortgages and car loans.
According to the report, people of color, Hispanics and those with low income are more likely than others to be in debt. According to the report, veterans and older people are also affected.
According to the CFPB, this could make it more difficult for these groups to secure housing, car loans, and insurance.
CNBC interviewed Ted Rossman, a senior analyst from Bankrate, who said that consumers could improve their credit scores by removing medical debt from their credit reports, particularly for older FICO models, which are used to obtain federally backed mortgages.
Rossman stated that there was an acknowledgement of the importance of medical care and that credit bureaus should not penalize it.