The mystery surrounding medical collections and whether or not they affect your credit score has finally been solved. Recent changes were made on how medical debt is reported and these updates could potentially help consumers avoid negative impacts on their scores. Here's what you need to know about these changes, and how medical debt can still affect you long-term.
As of July 1, paid medical collections are no longer included on U.S. consumer credit reports and unpaid medical bills cannot be reported until they are at least 365 days past the date of the first delinquency. Starting in March of 2023, the consumer reporting agencies will not include any medical debts with a balance less than or equal to $500 on consumer reports.
Each bureau has a different scoring model, so there is no way to predict how much this will impact your credit score. Borrowers with good standing credit could potentially see a big increase in their current scores. Borrowers with recently reported medical collections could also see an increase in their score.
Keep in mind, this is only for medical collections, so if there are other derogatory items reported that are not related to medical collections, you could still see a decrease in your credit score. In very few cases, some borrowers may see a drop in their score with this change, but this isn't expected to be common.
If you have experienced a decrease in your credit score due to medical collections and it prevented you from qualifying for a mortgage, this new reporting model could help you get in the home you've always dreamed of!