You may need to do some work to make your credit report shine. So get your reports. They are always free.
TEXAS, USA – When you think of all your bills, what do you think is the most common type of debt on credit reports that is flagged as being collected? Is it rent, mortgage, credit cards, car payments, utilities or student loans?
It turns out that the Consumer Financial Protection Bureau discovered last year that “58% of the bills that are in collections and on people’s credit files are medical bills.” The CFPB has estimated that 43 million Americans have this particular type of bad debt on their credit reports.
And Texas has one of the highest percentages of people who have medical debt that has been turned over to a bill collector. According to one count, 22.7% of Texans are in this situation.
Federal consumer watchdog handles medical debt reporting
Medical debt is different from other types of debt. Medical bills are usually imposed on someone; unforeseen debt is accumulated because they suffer from illness or injury. It’s different from the credit that someone chooses, like a car loan. And unlike a home loan, you often don’t know in advance how much health care will cost.
If you’ve ever had to decipher a hospital bill, you know billing errors can be difficult to spot and fix. They can make your medical debt look worse than it really is.
Because of all of these things, the CFPB announced on March 1, 2022 that it was pulling out the microscope to look closely at the big three credit reporting agencies (Experian, TransUnion and Equifax) and hold them accountable for verifying that any bad medical debt that could harm your credit is correct. The CFPB also questioned whether unpaid medical bills should be included in credit reports.
After Watchdog Announcement, Credit Bureaus Announce Sweeping Changes
Just 17 days after that, the major credit bureaus announced big changes that they say will erase about 70% of the medical debt currently hanging over credit reports.
If you had overdue medical bills that were collected, paid for them, but that negative information is still on your credit report, those entries will be erased starting July 1.
Also, currently, unpaid health care bills that are subject to collection can be posted on your credit file after six months. Starting in July, you’ll get a one-year grace period before it shows up on your credit.
And starting next year, credit reporting agencies will no longer list medical debt for collection if it’s less than $500. This will likely help some credit scores look much healthier.
Check your credit reports! They are always free to obtain.
And a pandemic bonus: your access to free weekly credit reports has been extended through the end of the year.
Click here to get your reports. And then click on the button that says “Request your free credit reports.” This will allow you to keep credit reporting companies and agencies honest. Consumer Reports investigated last year and 34% of volunteers who checked their credit found errors in their reports.
If this happens to you, let the company know (preferably in writing) that is mistakenly posting negative information about you. Also, alert all three major credit reporting agencies indicating the error.
The credit bureaus have 30 days to investigate and they must respond to you in writing. And in the case of an error that is corrected, if you request it, the credit bureaus must notify anyone who has recently received your credit report that it contained an error.
These things make a difference. Especially with rising interest rates, you don’t want to pay even more just because your credit report makes you look like a bad credit risk.
More useful resources
Forbes published an article with lots of advice on medical debt and credit reports.
Additionally, the federal government has a page full of rich information on disputing credit report errors, as well as specific contact information for each of the three major credit reporting bureaus. They even have a sample letter to fill out to dispute credit report errors.