In a surprising move, all 3 credit bureaus significantly revised their Medical Collection reporting process. Historically, the big 3 (Equifax, Experian, TransUnion) seemed confused on how to best report Medical Collections to credit.
Problem with Medical Collections and Your Credit
According to the CFPB, 43 million Americans have unpaid medical collections on their credit. As these 43 million know, medical collections slip onto a credit report far too easily. Conversely, removing medical collections from a credit report is far too difficult.
Oftentimes, consumers don’t know they have an outstanding medical bill. Typically, they learn about it when it has evolved into a medical collection. In addition, who money is owed to is not always clear.
How Medical Collections Magically Appear on Credit
How does someone not know who they owe you ask? Imagine yourself in the Emergency Room. As you take a bite of yummy Hospital dinner, someone in blue scrubs slips in and out of your room without you noticing. No big deal right? No, until later when your find the blue scrubbed mystery nurse billed you separately for writing down your oxygenation stats! Now you have a medical collection for the Oxygenation tracking company the Hospital contracts with.
Exaggerated as this scenario may be, it’s not far off. Doctor visits often involve multiple service providers. This creates confusion and complexity in the medical billing process. Additionally, insurance companies pay bills late, pay the wrong amount and sometimes, they don’t pay at all. As you can see, surprise medical collections stem from all kinds of different situations.
Medical Collections Reporting to Credit Improves
True to form, these changes will be in effect between 2016 and 2018. At least there is consistency with all the inconsistencies related to medical collections. So that means it’s consistent, doesn’t it? As much as a specific date would be helpful at least change is on it’s way. Expect to see improvements in these 2 areas:
- How easily medical collections now report to credit
- The level of difficulty in removing medical collections from credit
Reporting medical collections to a consumer’s credit becomes more difficult for collection agencies thanks to the above changes. For example, Equifax, Experian and TransUnion must now wait 180 days before reporting medical collections to your credit report.
Finally, consumers will be free of medical debts haunting their credit for years. Previously, unless a consumer successfully filed a credit deletion request, a medical collection haunted their credit for 7 years! As a result of these changes, medical collections are removed from credit once paid in full if the consumer’s insurance company pays them. A 2014 study by the CFPB determined medical collections account for over 50% of Americans’ debt.
By Jeremy House