The share of American consumers with medical debt on their credit reports has declined dramatically over the past year as major credit rating agencies removed small unpaid bills and debts that were less than a year old, according to a new analysis from the nonprofit Urban Institute.
At the same time, millions of Americans have seen their credit scores improve, making it easier for many to get a job, rent an apartment, or get a car.
“This is a very significant change,” said Breno Braga, an economist at the Urban Institute and a co-author of the study. “It affects a lot of people.”
The analysis found that, as of August, just 5% of adults with a credit report had a medical debt on their report, down from almost 14% two years earlier.
Urban Institute researchers also found that Americans with a medical debt on their credit report in August 2022 saw their VantageScore credit score improve over the next year from an average of 585 to an average of 615.
That moved many consumers out of the subprime category. Subprime borrowers typically pay higher interest rates on loans and credit cards, if they can borrow at all.
Consumers’ improved scores don’t mean the medical debts have been eliminated. Hospitals, collectors, and other medical providers still pursue patients for unpaid bills. And many continue to sue patients, place liens on their homes, or sell their debts.
But the credit reporting c …