LOS ANGELES (KNX) - Equifax, Experian and TransUnion – three of the country’s largest credit reporting agencies – announced last week that they are removing almost 70% of medical debt from consumer credit reports.
The removal is set to begin July 1st and according to Dean Kaplan, President of the Kaplan Group, this is the “biggest thing impacting consumer credit reports.”
“Over 58 percent of debt reported to collection agencies is medical debt and that’s about four times larger than any other debt,” he told KNX In Depth, adding that 60 percent of medical debt is under $500. “What will happen is any debt that’s under $500 – a single debt – should no longer appear on someone’s credit report.”
The removal comes after the Consumer Financial Protection Bureau conducted a study that found $88 billion in medical debt on consumer credit records and that it’s the “most common debt collection tradeline on credit records.”
“The point of credit scores and, therefore, credit reports is to help lenders, potential lenders decide ‘is this a good person to lend to?’”, he explained. “And what they found by studying past results was that having these small balances on their which lowered the credit score really didn’t impact the person’s credit worthiness because these medical debts…they’re typically unexpected one-time events.”
He should the removal will happen automatically and take a full year to roll out. He urges people to check their credit reports every three months.
Listen to Kaplan’s full interview in the audio above.
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