Approximately 15 million Americans continue to grapple with medical debt on their credit reports, despite reforms implemented by Equifax, Experian and TransUnion in March 2022, the Consumer Financial Protection Bureau (CFPB) revealed in a study published Monday.
As of June 2023, about 5% of Americans had unpaid medical bills on their credit reports, down from 14% in March 2022. Older Americans saw the largest improvement, as only 3% of them had medical bills on their credit reports in June 2023, compared to 8.4% in March 2022.
But the effectiveness of the changes made by the three major credit reporting agencies appears weaker for lower-income communities and individuals residing in Southern states. On average, people living in the South continue to have the most medical bills in collections and have the largest dollar amounts outstanding.
Collectively, Americans have more than $49 billion in medical debt in collections. This amount has declined, however, after a previous CFPB study found an estimated $88 billion in medical bills on consumer credit reports.
Medical debts have had significant long-term financial consequences on consumers as paid debts that are sent to collections remain as red marks on their reports. This often limits their options for housing, loans and credit cards.
Traditionally, health care debt held less weight than other types of debt and typically didn’t impact credit scores. In most cases, medical providers refrained from reporting payment activity, or lack thereof, to the credit bureaus. In general, unpaid medical bills went into collections anywhere between 60 to 180 days after becoming delinquent, depending on the provider.
Since March 2022, however, the three nationwide credit reporting companies have made significant changes. They removed all unpaid medical debt with an initial balance below $500 from credit reports. The time before medical bills in collections can appear on credit reports was extended from 180 days to one year. And the companies ceased reporting medical bills that have been resolved after going into collections.
The average medical balance on credit reports increased from March 2022 to June 2023, going from $2,000 to more than $3,100 as the credit reporting changes primarily targeted smaller balances. While many bills were removed, a significant portion of medical collections balances still linger on credit reports.
