Equifax Inc., EFX, Experian as well as other massive credit-reporting firms will eliminate tens of billions of dollars in medical debt from people’s credit reports which might be a good turnover for Americans to borrow. The major change is said to have been in the works for several months now and will remove almost 70% of medical debt in collections accounts.
Starting July, the massive firms will eliminate the debt that has been paid for after being sent in collections. Usually, these debts may still appear on an individual’s credit report for up to 7 years despite that they may have already been paid off. Moreover, new and/or more recent medical debts will not be reflected on credit reports for a full year after being sent to collections.
The companies also plan to eliminate unpaid medical debts of less than $500 during the first half of the following year. The threshold is alleged to still rise. After all, medical debt has been a huge impact and burden for many Americans, especially in the grave situations of medical emergencies and unexpected diagnoses that could balloon people’s expenses.
Wake Up Call
The Consumer Financial Protection Bureau (CFPB) approximates an amount of $88 billion in medical bills as reflected from 43 million credit reports. Three of the firms maintain reports on more than 200 million people in the U.S. The companies declared in a joint statement that the change is an essential step to support consumers after the COVID-19 pandemic; they also claimed that the elimination of such debts reflects their consistent commitment to supporting people’s access to fair and affordable credit.
Credit reporting priority
The companies are also trying to abide by the CFPB which has prioritized credit reporting under director Rohit Chopra. In an earlier statement, the bureau has said that it planned to hold credit-reporting firms accountable for taking insufficient action against companies that report false or exaggerated medical debts. As a matter of fact, the agency has maintained a hard line upon the country’s credit-reporting system which takes on a massive role in determining who gets credit and who doesn’t. People have more or less little control over what appears on their credit reports, which are dependent on the information submitted by lenders among others.
The CFPB claims that the agency’s research has indicated that medical debt cannot fully predict a person’s ability to repay compared to other kinds of loans. Medical debt collections on a person’s credit report may affect their ability to purchase or rent a home and may also make employment harder for them.
Lenders and banks
Lenders are the primary customers of credit-reporting firms; they use the information made available on credit reports to evaluate the chances a consumer may have upon their ability to pay back their debts. The companies are alleged to have also been in touch with banks to get their take on removing medical debts. Some banks have expressed that they worry less about removing smaller unpaid medical bills and those that are in collections for a shorter period.
Moreover, the credit-reporting firms have eliminated a swath of negative information from collections in the previous years such as unpaid library fines, traffic tickets, and gym memberships. In 2017, the companies decided to begin removing tax-lien and civil-judgment data.
Additional Resources for Building Your Credit Knowledge
If you want to be updated about new credit-related information, or want to leverage your financial situation, you can visit the Uptrend Credit website. They specialize in providing and empowering communities in building generational wealth with credit and financial literacy. You can also visit our Youtube channel anytime.