If you have medical debt and haven’t checked your credit score lately, you may be in for a pleasant surprise. Changes to the major credit bureaus’ reporting have helped boost credit scores by an average of 30 points for people with medical debt, according to a new Urban Institute analysis.
If you’re among the millions of consumers saddled with medical debt, here’s how your credit score may have been affected, why it matters and how to access your credit score and reports for free.
How changes to medical debt reporting raised credit scores
Since 2022, the three major credit bureaus -- Equifax, Experian and TransUnion -- have made substantial changes to how they report medical debt:
- Any medical debt under $500 was removed from credit reports in April 2023. Most medical collection debt that appeared on credit reports was under $500, according to the Consumer Financial Protection Bureau.
- Unpaid debts less than a year old were eliminated from reports in August 2022.
- Paid medical debts in collections were wiped out in July 2022. Previously, medical collections debt remained on your credit report for seven years.
The changes have had a significant impact. Among about 27 million consumers who previously recorded medical debt collections on their credit reports, the average VantageScore -- one of the two main credit scoring methods -- increased from 585 to 615 between August 2022 and August 2023, according to the Urban Institute report.
Why does your credit score matter?
Your credit score is an important number in your financial life. It can help when getting a mortgage, auto loan or credit card. If you have a higher credit score, you may be more likely to qualify and at a better rate, which can save you money over the life of a loan. Your score can even make a difference if you want to get a new job or rent a home.
There are two main scoring models used to generate your credit scores: FICO and VantageScore. They generally use the same criteria, including payment history, credit utilization, age of credit accounts and credit mix.
Lenders use these scores to help determine whether they'll approve you for a credit product, and at what rate. A low credit score signals to a lender that you’re more likely to have trouble managing debt, like missing payments or carrying a large balance.
However, the CFPB has argued that evidence of medical debt doesn’t accurately predict creditworthiness, particularly since medical debts are often due to circumstances out of people’s control and are compounded by a complex health care system. Having medical debts wiped from a credit report can help boost consumers’ credit scores, which in turn helps them qualify for financing options with lower interest rates.
How to check your credit score
If you haven’t checked your credit score lately, it’s easy to do. Most credit card companies and lenders offer this service for free, or you can use a credit monitoring service to get your score as well as receive fraud protection.
Your credit score is based on your credit reports, so it’s important to review those for errors to ensure your score is accurate. You can order your free annual reports once a week from all three major credit bureaus at AnnualCreditReport.com.
If your score still isn’t where you want it to be, here are some expert tips to help you raise your credit score.
