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Most medical collection debt to be wiped from credit reports

Your credit report could see a boost because of the changes.

INDIANAPOLIS — Medical bills from an unexpected incident can set you back thousands of dollars.

If you're not able to pay it, that debt can haunt you for years.

Now, changes are coming to how medical collection debt is reported.

Medical Collection Debt: Is it different?

Ted Rossman with Bankrate.com said studies suggest your inability to pay one big medical bill doesn't accurately reflect your general borrowing habits.

"Your credit score is really meant to be a financial report card of sorts. It's supposed to predict how likely you are to pay back lenders. Medical debt is a little bit of apples to oranges with respect to those monthly bills, like your credit card, your car loan, your mortgage," Rossman said.

That's part of the reason why Experian, TransUnion and Equifax are making big changes to how they handle medical collection debt.

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Starting in July, paid-off medical collection debt will be dropped from credit reports.  

Currently, it can stick around for up to 7 years.  

As for unpaid medical debt in collections, it will take longer to show up on your credit report - One year, instead of six months.

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"A lot of it has to do with that insurance tangled web," Rossman said. "It may not have been your fault."

The last change taking effect in 2023 is that the bureaus will no longer put medical collection debt under $500 on your credit report.

The credit reporting agencies say these steps will remove close to 70% of medical collection debt accounts from credit reports.

While these updates should happen automatically, request your credit reports and check anyway.

Future Medical Bills

If you know you have a pricey procedure coming up, talk with your provider about how you're going to pay for it. 

Treat it almost like vehicle financing. Does the medical group offer a no-interest payment plan? If not, what do personal loan rates look like?

Don't automatically just put it on a credit card because it's often the most expensive debt. Rossman said if you put a medical charge on your credit card, it's then reclassified as credit card debt and not medical debt.    

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