If you have medical debt, you have likely heard about the recent changes announced by the three major credit bureaus. Beginning July 1 of this year, they changed how they will report outstanding and paid-off medical debt, which as a result, will affect the credit reports and scores of everyone with reported medical debt.
Paid-off medical debt
Equifax, Experian and TransUnion all agreed to remove medical debt once it has been paid off or settled. This is a huge change because previously the negative reporting of this debt would usually last for seven years. If you were in this position, negative reporting would still affect your credit score, even if you eventually paid it off or settled it. As of July 1, it should have disappeared from your report.
Debt age will change as well
In addition, outstanding medical debt will not show up on your credit report until it is at least 12 months old. This means that, if you had medical debt on your report prior to July 1 that was not 12 months old, it should also drop off automatically. It will reappear at the 12-month mark if it is not paid off or settled.
Check your credit report
If you have not already confirmed that your paid-off, settled and less than 12-month-old medical debt is already off your credit report, it is a good idea to check it soon. If that debt is still there, dispute it and it should fall off your report within 30 to 60 days.
Next year, Equifax, Experian and TransUnion will stop reporting medication debt under $500 entirely, regardless of age. Though, it is unknown if this threshold will include ancillary fees or just be the original medical debt.
Does not bar lawsuits
For those with active and outstanding medical debt, a key takeaway of these changes is that it does not affect the options the debt holders have to enforce the debts. In other words, even if that $500 is not reported to your credit report, you could still be sued for it. And, just because they have to wait a year for the debt to show up on your credit report does not mean they have to wait a year to take you to court for that debt.
This is why, even with this news, bankruptcy is still a good option for many with large, outstanding medical bills. It is a way to get a fresh financial start.