That change officially went into place in April 2023, about a year after the Consumer Financial Protection Bureau published a lengthy report questioning the role of medical debt on credit reports. The CFPB stated, “We are working to stop unfair medical debt collection and coercive credit reporting practices that add to the strain on American families.”
A few months later, in July 2022, the credit bureaus announced all paid medical debt would be removed from credit reports. Plus, medical collections companies now have to wait one year to report medical debt on a credit report. Previously, they only had to wait six months.
How does medical debt impact mortgage credit score?
The cost of health care in the United States can be expensive and, unpredictable. Carrying medical debt can lower your mortgage credit score, put a strain on your budget, and make it harder to get an affordable home loan.
The changes to how medical debt is reported could affect millions of people, particularly those who are young and on the lower end of the wage scale.
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.
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 medical collections which affected your credit score
You may now qualify for additional loan products
You may now qualify for a lower interest rate
If you’d like to buy a home, it may make sense to pay off your medical debt to less than $500 and have your credit re-pulled. Talk to your local mortgage expert to find out if taking that step could open up different home financing options for you!
1 Not all borrowers will qualify. This is not a commitment to lend. Qualifications subject to change without notice.