That has changed significantly in recent years, as the three national credit reporting agencies – TransUnion, Equifax and Experian – have eliminated much of that debt from credit reports. In the last two years, they stopped reporting debts less than $500 and debts less than a year in collections.
According to a recent study by the Urban Institute, these changes have erased medical debt from the credit reports of millions of Americans. The percentage of Americans with unpaid healthcare bills on their credit reports dropped from 12% in August 2022 to 5% in August 2023.
Americans who cleared medical debt from their credit reports during that period saw their credit scores increase by an average of 30 points, the Urban Institute study found, moving them out of the “subprime” bracket and closer to credit “firsts”.
That still leaves about 15 million Americans with $49 billion in medical debt outstanding on their credit reports, according to research from the Consumer Financial Protection Bureau, the government agency that will implement the new rule.
These patients are the ones who will benefit most from the Biden administration’s policy.
“There are good reasons to argue that credit reports should reflect bad behavior rather than bad luck,” said Neale Mahoney, a Stanford economist who studies medical debt. “Medical debt is often the consequence of ‘my son broke his arm, I had bad luck and now I have a lot of bills.’”
