If you’ve been putting off getting into the housing market until those old medical bills are removed from your credit report, then you need to know about a recent change that could drastically help you out.
Last month the nation’s three largest credit reporting agencies announced jointly that they would be removing paid medical bills from individual’s credit scores. These are bills that resulted from a one-time medical issue, like a car wreck or an emergency surgery. The patient was not in a position to pay off the bills right away, and so they went into collection.
Under the current system those bills, even when completely paid off, would stay on an individual’s record for up to seven years. They are part of a calculation that forms an individual score that lenders use to determine if person qualities to purchase or even refinance a home.
Starting this summer, that debt will no longer be included on consumer credit reports.
The move will not apply to everyone. People who had bills go to collection from ongoing health issues, or those who have not completely paid off their one-time medical deb t, will likely not see any changes to their scores.
According to a recent study by the Kaiser Family Foundation- two thirds of all medical debt is a result of a one-time treatment where people were not preparing or expecting a sudden major expense. In making their announcement last month the credit agencies, Equifax, Experian and TransUnion, said removing the black marks is necessary because such debts are not the best predictor of a consumer’s financial behavior.
“Medical collections debt often arises from unforeseen medical circumstances. These changes are another step we’re taking together to help people focus on their financial and personal wellbeing,” said Mark W. Begor, CEO Equifax; Brian Cassin, CEO Experian; and Chris Cartwright, CEO TransUnion. “As an industry we remain committed to helping drive fair and affordable access to credit for all consumers.”
In addition the agencies also announced that they would be increasing the time period before unpaid medical bills appear on a consumer’s credit report. Currently if a bill goes unpaid for six months it can dock an individual’s score. Under the new guidelines patients would have an entire year to pay off the bills before being penalized.
The new polices will go into effect on July 1, 2022.
Just For Buyers Realty works with a variety of mortgage lenders. If you’d like to have a conversation about how the changes can impact your score and chances of buying a house, give us a call at 910 202-4813, and we can make recommendations of several qualified lenders.
