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Medical Debt and Your Credit Score

  • Posted on September 12, 2022
older couple researching mortgage options
If you’ve paid off debt that was in medical collections, we have exciting news for you: that cleared debt is no longer included on your mortgage credit report.

The change went into effect at the beginning of July—and it’s not the only thing that’s changed. Collection companies now have to wait one year to report medical debt on a credit report. Previously, they only had to wait six months.

2023 will see even more changes. Next year, the three credit reporting agencies—Equifax, Experian, and TransUnion—will no longer include medical debt that is less than $500 on their reports.

How does medical debt impact credit score?

According to experts in the credit reporting and credit score industry, these changes can impact your score up to 100 points.

The exact impact will depend on your unique situation. For example: the less credit you have, the more impact a negative event, like medical debt, will have on your credit score.

It’s important to remember that you’ll only see a change in your credit score if your medical collection has a zero balance. If you continue to carry unpaid medical debt, it will continue to have a negative effect on your credit score.

What do these changes mean for me?

If you’ve paid off medical debt since the last time you had your credit score pulled, you may see an increase the next time you check your score.

When it comes to a mortgage, a higher score could mean:
  • You may now qualify for a loan, even if you’ve been denied previously because of credit score
  • You may now qualify for additional loan products
  • You may now qualify for a lower interest rate

How do I learn more about my options?

If you already own a home and have paid off any medical debt you were carrying when you applied for your mortgage, refinancing may be an option for you. Talk to your mortgage loan originator to find out if you could now qualify for a different product or interest rate.

If you’d like to buy a home, clearing your medical debt and having your credit re-pulled could open up different home financing options for you (for example, a lower interest rate and/or reduced private mortgage insurance).

To find out more, contact our team or start your secure, digital application now.


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