What credit unions have known all along federal regulation may now agree: For too many years, medical debt and collections have weighed heavy on consumers and members credit scores.
Due to the rising price of medical care, newer high-deductible plans for insurance and inflation, medical debts have become a burden many of our members cannot help or erase. In fact, 58% debts recorded in 2021 were for a medical debt, according to the Consumer Financial Protection Bureau.1 Even worse, these collections affect 100 million US consumers or 41% of the adult population. Among the hardest hit areas for medical debt are in the deep south and southeast regions of the US in which many counties experience rates of 30%-40% of consumers with medical debt.
The debts negatively affect members credit scores although the CFPB also finds that medical debt, unlike other kinds, does not accurately predict a consumer’s creditworthiness. In fact, we’ve seen similar changes already on a smaller scale. Last year, the three largest credit agencies – Equifax, Experian, and Transunion – stopped including some medical debt on credit reports, as long as the bills were paid-off or less than $500.
If this debt or the collections thereof does not accurately predict a person’s creditworthiness or risk, why is it even included on the credit report?
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