If you have checked your credit score this month, you may have noticed that your score went up. While this is good news, your first question may be why?
CFPB background
Back in March, the Consumer Financial Protection Bureau released a report of its investigation into the three major credit reporting bureaus (TransUnion, Equifax and Experian). That report found that TransUnion, Equifax and Experian credit reports were rife with errors, especially medical bills.
CFPB fallout
As a result of the CFPB report, TransUnion, Equifax and Experian announced changes to medical debt credit report requirements. First, beginning July 1, if you have settled or paid off your medical debt, it automatically drops from your credit report. Second, only medical debt that is at least a year old can be reported to the credit bureaus. This means that, if you have medical debt that is less than a year old, it automatically dropped from your credit report.
Positive affects
These are likely the reasons for your recent unexpected credit score increase. Plus, next year, medical debt under $500 will no longer appear on any Fayetteville, North Carolina, credit report. LendingTree.com claims that these new policies will affect 23% of those with medical debt, 22% of Americans who previously had medical debt, but paid it off.
Medical debt is a huge issue
United States medical debt surpassed $200 billion, according to the Kaiser Family Foundation. Indeed, 40% of United States adults have medical debt. And, of that debt, according to the CFPB, nearly half is listed on our credit reports.
New credit reporting rules will not help everyone
Unfortunately, these new credit reporting rules will not help everyone in North Carolina. Primarily, for those with outstanding (unpaid) medical debt, debt collection efforts and creditor harassment will continue. This is because, just because your debt is not reported, it does not mean that the medical debt owner does not want repayment. And, they will pursue you aggressively to get it. These new rules can make negotiating those debts down much easier as the financial consequences of that debt will not accrue for at least a year.