Medical debt is a major source of financial stress for many people. According to a study by the Consumer Financial Protection Bureau (CFPB), more than half of all debt collection accounts reported to the credit bureaus are related to medical debt. This can be especially problematic because medical debt is often incurred unexpectedly and can be difficult to pay off, even for people with insurance.
In the past, medical debt could have a significant impact on a consumer's credit score. Even relatively small medical debts could cause a consumer's credit score to drop significantly, making it harder to obtain credit, loans, or other forms of financial assistance. This could create a vicious cycle in which consumers struggled to pay off their medical debts, causing their credit scores to suffer, which in turn made it harder for them to access credit to pay off those debts.
However, the recent decision by Experian and Equifax to remove medical collections under $500 from credit reports is a step in the right direction. This change means that consumers who have small medical debts will no longer see those debts negatively impacting their credit scores. While this change may seem small, it can have a significant impact on the financial well-being of many consumers.
Of course, it's important to note that not all medical collections will be removed from credit reports. Collections that are over $500 will still be reported, and collections from other types of debts (such as credit card debt) will still be reported as well. However, for consumers who have small medical debts, this change can be a significant relief.
If you're someone who has experienced medical debt in the past, it's worth taking a close look at your credit report to see if any small medical collections have been removed. A borrower can do this by accessing their Federally Mandated FREE credit report at: www.AnnualCreditReport.com.
This could have a positive impact on your credit score and financial well-being. And if you're someone who is currently struggling with medical debt, it's worth exploring your options for managing that debt and protecting your credit score as much as possible. By staying informed and proactive, you can take steps to improve your financial situation and build a better future for yourself and your family.
If you were a borrower and couldn’t get a home loan in the past, it might be a great time to contact 1st Choice Mortgage, and we can review your file and see if the removal of medical collections has improved your chances of being a home owner.