Millions of Americans will now see a cleaner bill of health on their credit reports, making it easier for many to get an apartment or apply for a loan, the Wall Street Journal reported. Effective July 1, the three major credit reporting bureaus have removed medical debts that went into collection but were subsequently paid. In the past, these types of debts would remain on reports for as long as seven years. More changes are coming too. Beginning next year, credit reports will also be stripped of all unpaid medical debts up to $500. The two changes combined should scrub 70% of the approximately $88 billion in medical debt that currently shows up on the credit reports of 43 million Americans, according to the Consumer Financial Protection Bureau. Removing these blemishes should help some people when getting credit checks by landlords, employers, or when applying for loans, consumer advocates said. Some people could see a modest boost to their credit score, and others will benefit merely from having traces of the past debts deleted. Equifax, Experian PLC and TransUnion, the biggest credit-reporting firms, announced these changes to reporting practices in March, a month after a report from the CFPB suggested it would look into “whether policies should be implemented to eliminate unpaid medical billing data on credit reports altogether.” Though unpaid medical bills account for 58% of all debt in third-party collection, according to the CFPB, the agency’s research has found it isn’t a very good predictor of overall creditworthiness. FICO, which powers the most widely used credit scores, also found that paid medical collections are even less predictive of a person’s ability to repay than unpaid medical collections. (Subscription required.)
