Beginning in early July 2022, the Nationwide Credit Reporting Agencies (NCRA’s) (Equifax, Experian and TransUnion) will begin a two-phased change in how medical collection account information will be reported.
In the first phase that will occur, effective July 1st, the companies will remove ALL paid medical collections from credit reports. Additionally, unpaid medical collection accounts that are “younger” than one year will also be removed. Phase two, which will occur in 2023, will be the removal of any medical collection accounts with an amount of less than $500.
VantageScore Took Early Action
VantageScore does not believe that these types of debts and collections that have been paid off are predictive of a consumer’s creditworthiness. Medical accounts are different from other consumer debt because they often arise from unforeseen circumstances or complicated, opaque insurance and healthcare provider billing practices.
That’s why models introduced by VantageScore since 2013 ignore paid collections including those stemming from medical debt. Medical debt outsourced to a third-party collection agency is ignored for 6 months to allow for insurance-payment processing, and as of July 1, 2022, the three NCRA’s exclude medical collection debt for an entire year before it appears on credit reports. When a medical collection account does appear on a consumer’s credit report, it has a muted impact on a consumer credit score based on the VantageScore 4.0 model. We applaud the NCRA’s for taking this step to lessen the impact of unforeseen medical collection debt for consumers.
Now what?
Despite the changes VantageScore already made, the new reporting changes may cause some score shifts.
Over 1 in 4 consumers have a collection: Nearly 28 percent of consumers have an external collection reported on their credit file. More than two-thirds of all collections are medical related.
Score increases: Four percent of consumers will be impacted by the July changes, and only 12 percent of those impacted consumers (or less than .5 percent of the total population) will see a score increase of about 16 points, based on the VantageScore 4.0 model.