Big Changes Coming to How Credit Agencies Report Medical Debt

Changes in the way credit agencies report and evaluate medical debt should reduce some of the painful financial consequences of having a health care problem.

CNN Money reports:

Starting September 15, the three major credit reporting agencies — Experian, Equifax and TransUnion — will set a 180-day waiting period before including medical debt on a consumer’s credit report. The six-month period is intended to ensure there’s enough time to resolve disputes with insurers and delays in payment.

In addition, the credit bureaus will remove medical debt from consumers’ credit reports once it’s paid by an insurer. (Some credit scoring models don’t penalize paid medical debt from any source.)

The changes grew out of two efforts by states to aid consumers: a 2015 settlement negotiated by New York Attorney General Eric Schneiderman and the three credit reporting agencies and an agreement shortly afterward between the agencies and 31 state attorneys general. The changes will be instituted nationwide.

The change can make a difference in people’s credit scores.

Under FICO9, the newest model, someone whose only major credit blot is one or more medical collections would see their median score increase roughly 25 points over older versions, said FICO’s Dornhelm.