Medical Collections Less Than $500 No Longer Impact FICO® Scores
Medical Collections Less Than 500 dollars No Longer Impact FICO® Scores
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The three major consumer reporting agencies (Equifax, Experian, and TransUnion) removed third party medical collections less than $500 from consumer credit reports in March & April 2023. As FICO® Scores are based on the information reported in an individual's credit report, the removal of this information means that it will no longer be considered by any version of the FICO Score.
This action joins other changes in medical debt reporting:
- Paid medical collection debt are no longer reported on consumer credit reports (effective July 2022)
- Consumers will have more time to work with insurance and healthcare providers to address their medical debt before it's reported. New third-party medical collections will be added to credit reports only after one year has passed. Previously, it was reported after six months.
FICO® Score Impacts
Approximately 10% of people with FICO Scores are impacted by the changes above, with most of those people having a medical collection less than $500. The potential impact on a person's FICO® Scores associated with these changes will depend on both the amount of collection information removed as a result of these changes, as well as the other information contained in the individual's credit file:
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If the consumer has other negative items reported in their credit file, the recency, frequency, and severity of those negative items will continue to be assessed by the score. Therefore, the removal of paid third-party medical collections and/or third-party medical collections less than $500 may have a more modest impact on the score.
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If the third-party medical collection is the only negative item reported, its removal could have a more substantial positive impact on score.
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Tom Quinn is the Vice President of Business Development for myFICO and has over 25 years of experience working with consumers, regulators, and lenders regarding credit related questions and initiatives.