Credit Reports Show Fewer Debts In Collections, Helping Consumers Improve Their Creditworthiness
The three years since the COVID-19 pandemic have brought an onslaught of fear, not only existential dread about our own mortality and about the fragility of the natural ecosystem and of political institutions, but also more mundane worries about whether we can pay our bills this month while keeping up with the minimum payments on our debts. At the same time, there have been glimmers of hope about how things could be, much-needed breaks from the constant barrage of bills and late fees. From eviction moratoriums to the pause on student loan repayment, people got to feel, for a while, what it was like to live with a manageable debt burden. By the end of 2020, a lot of people with steady employment saw their debts get smaller as their entertainment budgets shrank to almost nothing and they put the money toward paying down loans and credit card debt. Now, most middle-income households are living paycheck to paycheck, as the prices of consumer goods have remained high. The new rules of credit reporting represent just a drop in the bucket of what consumers need to feel financially secure, but they can make it easier for you to access credit even if you have medical debt. To find out more about how the new credit reporting rules affect your creditworthiness, contact a Boca Raton credit repair lawyer.
Is It Possible That So Many People’s Credit Scores Got Better During the Pandemic?
The Consumer Financial Protection Bureau (CFPB) reported that the total amount of debt in collections, as reported on consumers’ credit reports, decreased by a third between 2018 and 2022. It also reported that 20 percent fewer people today have a credit report that shows at least one debt in collections, as compared to before the pandemic.
Even though medical debt still represents more than half of all debts in collections, changes in the credit reporting rules for medical debt are a major contributing factor to the change in the number of debts in collections appearing on credit reports. For example, credit reports no longer show medical debts in amounts less than $500, even if those debts have gone to collections. Furthermore, medical creditors must wait a year from the time the consumer received treatment before reporting the unpaid balance to the credit reporting bureaus. The old rule was six months. This gives customers more time to pay down their debt before it appears on their credit reports. If they have to take out a debt consolidation loan to pay it, then their credit scores will be higher, enabling them to get a lower interest rate on the loan.
Even If It Doesn’t Show Up on Your Credit Report, Creditors Can Still Seek Repayment
While this is welcome news, it is not an open invitation to ignore your debts. The longer window for reporting simply gives you more time to strategize about debt repayment and more time to gather funds to pay down your debts.
Work With a Debt Lawyer to Stay Ahead of Your Medical Debts
A South Florida debt lawyer can help you free up funds to pay your medical debt before it appears on your credit report. Contact Nowack & Olson, PLLC in Boca Raton, Florida to discuss your case.
Source:
news.yahoo.com/millions-of-debt-collections-dropped-off-americans-credit-reports-181801464.html
