Can paid-off medical debt still hurt my credit?

On Behalf of | Jun 21, 2022 | Debt Relief |

For those with medical debt, you know the debt struggle is real. Every day, you face that mountain of medical bills, in addition to all of your other debts. Every dollar that goes to that medical debt is another dollar out of the family budget. And, after you finally pay it off, you are done, right? Wrong. Well, at least until July 1.

The old story

Currently, when a bill is paid past 30 days late, it can be reported to the credit bureaus (TransUnion, Equifax and Experian). For Brooklyn medical bills, and those for everyone else, since 2017, medical debts could not be put on those bureaus until it was at least 6 months old. However, once it was reported late, that late payment stayed on your credit report for years. If it was sent to collections or was not paid that month, then each unpaid bill or the move to collections was another mark on the credit bureaus that would last years. Even if you paid that debt off, those negative marks stayed on your credit report.

Changed procedure

Beginning July 1, though, the story changes for everyone across the country, including right here in Long Island. If you have paid off your medical debt, at that time, you will notice it will disappear from all three bureaus. This means that all of the negative marks associated with that debt will also disappear, meaning your credit score should see a boost, maybe, a significant one.

The reporting rules are changing too

In 2023, all three credit bureaus will stop reporting medical debt under $500. This means that missing a payment to your doctor after an insurance denial will no longer haunt your credit report for the better part of a decade. Plus, beginning soon, the 6 month wait period to report unpaid medical debt will be extended to 12 months.

No help for those struggling with medical bills

For those struggling with unpaid medical bills though, none of these changes will help. You could still face a lawsuit from the medical provider, and your credit report and score will continue to be harmed. This is why many facing mounting medical debt decide to file for Chapter 7 Bankruptcy. It stops the Westchester County collection calls and any lawsuits filed against you.