Key Changes to Medical Debt Reporting

There’s good news in the world of credit scores and credit reports! Major key changes to the way FICO is calculating their credit scores will make medical debt a bit less scary.

With many people struggling to pay off their medical bills, even with insurance, it’s about time for some major changes. Here are some key things to know about the upcoming changes regarding medical debt and how it will be reported.

Increased Waiting Period

Those with medical bills will now have a 180-day waiting period before their debt will be included in their credit report. This gives the debtor a six-month time frame to get organized, review bills, start payments, make the necessary arrangements with their insurance company, and sort out billing problems. This new change to how medical debt is reported will help limit the number of people paying their bills late, in turn helping to keep their credit score in good shape.

Given Less Weight in Calculation

Medical bills will still be considered in a consumer’s credit score, but they will have less weight when calculated. The reason for this is because FICO believes not all debt is equal. Unlike a car loan – which is elective – a medical bill can land on a consumer without notice, leaving them well over their heads in unexpected debt. A consumer has no control over an illness or accident that may arise. With this new change, according to FICO, consumer credit scores will increase by 25 points. That can mean the difference between receiving a lower interest rate on your mortgage or not!

Medical Bills in Collections Disappear Once Satisfied

No longer will unpaid medical bills weigh down your credit report with negative marks! According to the new FICO scoring model, FICO Score 9, credit reporting companies must remove medical debt from your credit report once the bill has been paid in full. This means even if you are late on your medical bills, your credit report won’t be effected once the bill is satisfied. In the past, when overdue medical debts were eventually paid, they still remained on your credit report for a lengthy period.

Trained Help to Become More Available

The three main U.S. credit-reporting agencies – Equifax, TransUnion and Experian – will be training additional staff to investigate and settle all medical debt disputes themselves. In the past, agencies would submit medical disputes to creditors, who could miss a mistake meaning it would be left on your credit report for years. According to LGFCU, nearly 43 million people have at least one medical account in collection on their credit report. With one-in-five consumers having a mistake on at least one of their credit reports, there could be many mistakes that go unnoticed. Adding trained staff can help limit the mistakes and keep them from lowering your credit score.

With the new changes coming to medical debt and the way it’s reported, consumers will hopefully be better able to stay on top of their medical bills, increase their credit score, and keep their credit report clean. This is just the beginning, as LGFCU reports that more changes will be coming! How do you feel about the new changes? Leave us your comments!

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  • Will these changes be retro active or only going forward? Thanks for the info!

    • Jimmy Ingrilli Jimmy Ingrilli /

      Thanks for your question!
      Unfortunately, the rules are not retroactive. If you already have medical debt or damage from it, the new rules for reporting it won’t help you with past debt. It is also important to understand that FICO is essentially selling a new and updated product – meaning that customers can choose whether or not to use the FICO 9 scoring model or stick with an older version.

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