New credit bureau policy to erase paid medical debt from credit reports; OSPIRG offers tip sheet

PORTLAND, Ore. (KTVZ) – Medical debt negatively impacts the credit scores of millions of Americans. This problem is so prevalent that one in five Americans had a medical bill they could not pay at the time they received care. Those bills often end up in debt collections, and then show up on a person’s credit report. In 2021, 43 million credit reports listed medical debts in collection.

Right now, medical debt, even when it is paid off, can remain on a credit report for up to seven years. But a new policy voluntarily announced in March by the three major credit bureaus -- Equifax, Experian and TransUnion -- changes how paid medical debt will be reported on credit reports starting on July 1. If the credit agencies follow their own policy, it should help millions of Americans who have paid off their medical debt but are still carrying the negative implication on their credit reports.

“It’s incredible to think that even when you pay off your medical debt, the credit bureaus continue to penalize Americans by lowering their credit scores,” said Maribeth Guarino, OSPIRG’s health care advocate. “Consumers have been denied auto loans, credit cards and mortgages -- and low credit scores can even impact hiring decisions by potential employers.”

In the March announcement, the credit bureaus claimed their new policies will result in nearly 70% of medical debt in collections being removed from credit reports. The three promised changes include:

• As of July 1, paid medical debt will be erased from credit reports
• New medical debt won’t be included in credit reports until a year after the debt is given over to collection agencies, rather than the current six months.
• Beginning in 2023, credit reports will not include medical debt of less than $500

OSPIRG Foundation released a tip sheet Tuesday that Americans can use to ensure any paid medical debt has been removed from their credit reports. The tips explain how to obtain a free copy of credit reports, where to check to make sure paid medical debt has been removed, and how to dispute any mistakes in a credit report.

OSPIRG Foundation urges Oregonians to check their credit reports to make sure that paid-off debt is erased, and to check for any other errors.

“Medical debt isn’t like failing to pay for a discretionary purchase. Because of that, credit bureaus should stop reporting debt arising from medically necessary procedures altogether,”  Guarino said. “No one should have to worry about their reputation being sullied for years just because they got injured or sick.”