The three major credit reporting agencies have struck a deal with regulators that will change how they report medical debt, according to NPR.
The agencies have agreed to a six-month waiting period before placing medical debt on an individual's credit report, NPR reported. And if the debt is the result of a dispute between a payer and provider, they will wipe out the debt once the two reach a settlement and the bill is paid.
In the past, advocates say, such black marks remained on consumer credit reports even after payments were made and the debt was cleared up.
NPR reported that more than half of all negative items on people's credit histories are related to medical debt. Among those individuals who only have negative reports related to medical debt, about half have no other negative reports on their credit reports.
The average medical debt is nealy $1,800, and close to 43 million Americans have such debt on their credit histories, according to a report released last year by the federal Consumer Financial Protection Bureau. More than half of all personal bankruptcies are tied to medical debt.
"This is going to help millions of people access more affordable loans," Mark Rukavina of Community Health Advisors told NPR. "People will no longer be penalized for having a medical bill slip past them and get on their credit report even though the bill gets paid."
The agreement among the credit reporting firms was brokered through pressure from New York State Attorney General Eric Schneiderman.
"Illegal payday loans and other information like medical debt end up on credit reports where they can misrepresent a consumer's creditworthiness," New York City Department of Consumer Affairs Commissioner Julie Menin said in a statement. "The agreement by Attorney General Schneiderman with the three credit reporting companies is no small feat and I applaud him for ambitiously requiring these institutional agencies to make it easier to obtain and repair one's report."