Higher credit scores can make it easier to qualify for a mortgage and get a better interest rate on a home loan. Beginning this summer, more borrowers may be able to enjoy this benefit.
The three nationwide credit reporting agencies – Equifax, Experian, and TransUnion – recently announced they will remove nearly 70% of medical collection debt from consumer credit reports in July, a decision made after extensive research.
According to the Kaiser Family Foundation, two-thirds of medical debts are the result of a one-time or short-term medical expense resulting from an acute medical condition. In the wake of the COVID-19 pandemic and a detailed review of medical collection debt on credit reports, the credit agencies are making changes to help people with medical debt qualify for loans they need to buy homes, cars, and more.
These measures will go into effect on July 1, 2022:
- Paid medical collection debt will no longer be included on consumer credit reports.
- The time period before unpaid medical collection debt would appear on a consumer’s report will be increased from six months to one year, giving consumers more time to address their debt before it appears in their credit file.
Additionally, beginning in the first half of 2023, the credit agencies will no longer include medical collection debt under at least $500 on consumer credit reports.
“Medical collections debt often arises from unforeseen medical circumstances. These changes are another step we’re taking together to help people across the United States focus on their financial and personal wellbeing,” said the CEOs of the three credit agencies in a joint statement. “As an industry, we remain committed to helping drive fair and affordable access to credit for all consumers.”
At Homeowners Financial Group, we’re all about improving people’s lives through homeownership. When it’s possible for us to do that for more borrowers, even better! Contact a Homeowners Licensed Mortgage Professional today to discuss how these credit report changes could improve your ability to secure a home loan with a great rate.