Big News: Medical Debts Under $500 Will No Longer Hurt Your Credit Score!

AI-generated art of a happy person with a less than $500 debt being removed from her credit report
Big News: Medical Debts Under $500 Will No Longer Hurt Your Credit Score!

It’s important to stay up to date on the latest changes to laws and regulations that affect your credit score. One recent change that’s particularly important for anyone who’s struggling with medical debt is the new rule that requires major credit reporting agencies to remove medical debts from credit reports if they are under $500.

This change was introduced in 2020 as part of the Economic Growth, Regulatory Relief, and Consumer Protection Act, and it’s a significant step forward for consumers who have been unfairly impacted by medical debt. Here’s what you need to know about the new rule.

Why Medical Debt is a Problem

Medical debt is a major issue in the United States, with millions of people struggling to pay for the care they need. According to a 2019 report from the Consumer Financial Protection Bureau (CFPB), around 43 million Americans have medical debt on their credit reports, and it’s often a significant barrier to accessing credit and financial stability.

One of the problems with medical debt is that it can be unpredictable and difficult to manage. Even with insurance, many people end up with large bills that they simply can’t afford to pay. And unlike other types of debt, medical bills often come with unexpected fees and charges that can quickly add up.

The Impact of Medical Debt on Credit Scores

When medical debt goes unpaid, it can have a serious impact on a person’s credit score. This is because medical debt is often reported to the major credit reporting agencies, and it can stay on a person’s credit report for up to seven years.

Unfortunately, even a small amount of medical debt can have a significant impact on a person’s credit score. This can make it difficult to access credit, rent an apartment, or even get a job. And because medical debt is often unexpected, it can be particularly challenging for people to manage.

The New Rule: What You Need to Know

Under the new rule, the major credit reporting agencies are required to remove medical debts from credit reports if they are under $500. This means that even if you have unpaid medical bills, they shouldn’t show up on your credit report if they are below this threshold.

However, if you do notice that a creditor or debt collector is reporting a medical debt below $500, you should first determine if they have improperly coded it as a non-medical or “other” debt. If they have, contact Paramount Law immediately for a free consultation. Debt collectors cannot falsely represent the “character” of a debt under the FDCPA, 15 U.S.C. 1692e(2). Additionally, debt collectors cannot communicate false information about the debt to a credit reporting agency.

If it is an original creditor reporting (instead of a third party debt collector), it may first be necessary for you to dispute the item with the credit reporting agencies. You should do this in writing, via a certified letter sent directly to the credit reporting agencies (Equifax, Experian and Trans Union). Otherwise, you run the risk of the dispute being ignored or limiting your abilities to file a lawsuit in order to correct your report.

What You Can Do if You Have Medical Debt

Check your credit report regularly to make sure that any medical debts that are under $500 have been removed. If you do find errors on your credit report, you have the right to dispute them and have them removed. We will be happy to provide you with free detailed instructions on how to do this properly.

If you’re struggling with debt and don’t know where to turn, talk to a lawyer who specializes in consumer debt, such as Paramount Law. We can help you understand your options and work with you to develop a plan that will help you get back on track financially.

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