Early impacts of removing low-balance medical collections
The article “Early impacts of removing low-balance medical collections” by the CFPB Office of Research discusses the effects of changes made by the three nationwide credit reporting companies in 2022 and 2023 regarding medical collections on consumer credit reports. These companies committed to removing medical collections that were paid, less than a year past due, or with initial balances less than $500. The report found that the percentage of consumers with at least one medical collection dropped from 14% in March 2022 to 5% in June 2023. Most of the removed collections were those with balances below $500.
Key findings include:
- Churn in Reporting: Significant churn remains in medical collections reporting. Around 10% of consumers who should have had all medical collections removed acquired new collections over $500, while about a third of those expected to retain collections had all collections removed.
- Credit Score Improvement: Consumers who had all medical collections removed saw an average credit score increase of 20 points compared to those who did not. Many moved to a higher credit score tier.
- No Change in Credit-Seeking Behavior: Despite improved credit scores, there was no significant increase in credit-seeking behavior among consumers.
The study used data from the CFPB Consumer Credit Panel, focusing on consumers with medical collections in December 2022 and examining their records in August 2023. The results indicate that while credit scores improved for many, medical collections reporting remains inconsistent, and new collections often quickly drop off credit reports. The report concludes that these inconsistencies make it difficult for creditors to use medical collections as a reliable indicator of consumer creditworthiness.