Here’s Why Your Medical Debt No Longer Hurts Your Credit Score

Medical debt is a type of debt that is incurred when an individual is unable to pay for medical services or treatment. Medical debt can be incurred for a variety of reasons, including unexpected medical bills, high medical expenses, or a lack of health insurance.

Medical debt is a major financial burden for many Americans, and it used to have a significant impact on credit scores and still has an impact on overall financial well-being.

Relief options are available for those struggling to repay medical debt, so it is important to consider all of your options when struggling to repay the debts. If you have credit card debt on top of medical debt, here are the best ways to consolidate credit card debt.

Changes to medical debt credit reporting

Starting July 2022, medical debt will be removed from credit profiles at the three major credit bureaus – Equifax, TransUnion, and Experian. Debt that has been paid will be wiped entirely from your credit report, and medical debt that is currently in collections will not appear on your report for one year.

This gives you more time to work with providers or collectors on paying the debt as you can. Starting next year, medical debt in collections under $500 will not be on your credit report at all.

This news comes during a multi-year global pandemic, which has left many with hefty hospital bills. Although it is a huge relief for many that these debts will not have an impact on credit scores, there is still much work to be done to improve the healthcare system so people do not go bankrupt while getting necessary procedures.

One in ten Americans currently has at least $250 in medical debt, which is a huge percentage of the population. Medical debt is very different from other kinds of debt and should not be a factor in whether or not someone can pay back debt, which is what one’s credit score describes. Medical debt comes from unexpected situations, so it should not be treated the same way as credit card debt or a mortgage.

Many people receiving medical services do not even know the amount that they will eventually owe due to insurance, and there are often mistakes that come with billing. There have been many cases of a bill going to collections before someone has even known they needed to pay it. Previously, if a medical debt got sent to collections and was promptly paid off, that debt appeared on one’s credit profile for seven years.

Before your medical debt gets sent to collections, make sure you request an itemized bill so you know exactly what you are being charged for. There are often coding mistakes or other charges that can be disputed to reduce the cost of the bill.

Once you are sure the bill is correct, you can work with the hospital on payment plans or other financial assistance. Many hospitals are willing to work with you in any way they can. If your debt does go to collections, make sure you are not being overcharged or that fees have not been added to the original bill, which is against the law.

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