New rules regarding the reporting of medical debt on credit reports could benefit tens of millions of consumers. Under the changes, credit bureaus are required to wait 180 days before placing any unpaid medical bills on an individual’s credit report. Additionally, when a medical debt is later paid by insurance, it must be removed from the consumer’s credit report. The rules went into effect in September 2017 as the result of a settlement between the NY Attorney General and Equifax, Experian, and TransUnion. The rule change gives many consumers a much-needed break when they have unpaid debts for medical treatment in the future. While the new rule is not retroactive, the credit bureaus are removing medical debts that are less than 180 days old.
The Quandary of Timely Payment
In addition to the sheer size of some medical bills that can be difficult to pay off quickly, many consumers find themselves waiting extensive periods of time for their insurers to pay claims for medical treatments. Further, medical offices can send unpaid bills to collection agencies within 30 to 60 days. Under the old rules, consumers were at a considerable disadvantage and could find negative information placed on their credit reports before they had time to settle the debt. Approximately 20% of consumers have negative information on their credit reports stemming from past-due medical bills. Overall, medical debts account for 52% of all debts recorded on credit reports. Thus, the new credit reporting rule governing medical debts should have a positive impact on a significant number of consumers.
Medical bills are the third-most common type of debt to contain reporting errors. These errors can compound the issue of unpaid medical debts as patients seek to have mistakes corrected prior to completing payment. In the interim, many medical offices send the bills to collection agencies which further hurts the individual’s credit and makes it harder for individuals to secure new credit or favorable interest rates. Thus, it is crucial for individuals to take prompt action to dispute errors with their medical providers and to keep records documenting their interactions with the billing department. Should this debt show up on the credit report, the individual can use the documentation to file a dispute with Experian, Equifax, and TransUnion to have the negative information removed.