Medical debt under $500 removed from credit reports, potentially boosting credit scores for consumers

The three most-used credit rating agencies, Equifax, Experian, and TransUnion, have removed medical debt under $500 from consumer credit reports, potentially boosting the credit scores of some Americans.

With this recent announcement, nearly 70% of the total medical debt has been removed from consumer credit files.

The big three agencies said this action will help consumers by undoing some restrictions on their finances. In a press release, the three major credit bureaus’ CEOs said, “We understand that medical debt is generally not taken on voluntarily and we are committed to continuously evolving credit reporting to support greater and responsible access to credit and mainstream financial services.”  

Following this action, consumers have the potential to see a boost in their credit scores after the small amounts of medical debt have been removed, making it easier for them to obtain a loan, rent an apartment or secure a good interest rate.  

“We understand that medical debt is generally not taken on voluntarily,” the statement went on to say. “We are committed to continuously evolving credit reporting to support greater and responsible access to credit and mainstream financial services.”

Equifax, Experian, and TransUnion collect enormous amounts of consumer information and sell financial and demographic data to companies that want to assess the finances of their customers and potential customers. They also sell credit monitoring and fraud protection to consumers and provide businesses with the credit scores of customers, a rating meant to convey the reliability and soundness of the individual’s finances. 

Liz Coyle, executive director of Georgia Watch, a pro-consumer group, said “Medical debt often leads to bankruptcy, and Georgia has one of the highest rates of bankruptcy.” She also pointed out that the burden is proportionally higher among Black consumers. Medical bills can be crushing, soaring far above $500, and many consumers who dependably pay other expenses struggle with medical bills. Said Coyle, “What the bureaus announced is good, but it’s not enough.”

A consumer with lower incomes and a low credit score may find it hard to get a loan — or pay a much higher interest rate, which puts stress on a household.