​​Equifax, Experian, and TransUnion — the three major credit bureaus — are changing how credit scores are calculated, with a focus on medical debt reporting and installment loans. Read on to learn more about the changes, and how they may impact your score.

The three major credit bureaus recently announced changes to how credit scores are calculated.

This is important to note because the more you know about what goes into your credit file, the better equipped you’ll be to make informed decisions around maintaining and improving your credit score.

Plus, you’ll be more likely to spot errors or fraudulent activity, which can signal identity theft. 

With that in mind, let’s take a closer look at what’s changing, and what it might mean for you.

Changes to medical debt reporting 

Earlier this year, Equifax, Experian, and TransUnion released a joint statement announcing changes to medical debt reporting.

As of July 1, 2022: 

  • Paid medical debt will no longer appear on your credit report. Previously, paid medical debt would remain on your credit report for up to seven years — even after any outstanding bills were paid. Now, any medical debt that’s fully paid off will no longer impact your credit. 

  • You now have one year before unpaid medical debt shows up on your credit reports. Once a medical debt goes to a collection agency, you now have a full year to work with your insurance companies and healthcare providers to pay off the debt before it dings your credit. (In the past, the timeline was six months.)  

And, more changes are coming. 

In the first half of 2023:

  • Any medical debt under $500 that’s in collections will no longer be included in credit reports. According to a Kaiser Family Foundation study, two-thirds of medical debt stems from short-term or one-time expenses incurred because of acute medical needs. Medical debts can pile up suddenly and unavoidably; this change may help lessen the financial impact of a medical emergency. 

How will changes to medical debt reporting impact your credit score? 

That same Kaiser Family Foundation study notes that nearly one in 10 American adults have medical debt. If you’re one of them, how might your credit score be impacted? 

Here at Allstate Identity Protection, we partner with TransUnion to provide our credit monitoring service, so we reached out to the agency to learn more. 

“For consumers struggling with medical debt, the changes stand to make a positive impact on their overall financial health,” says Margaret Poe, Head of Consumer Credit Education at TransUnion. 

More good news? According to the joint statement, the bureaus estimate that the new measures will erase nearly 70 percent of medical debt from credit reports. 

“Buy now, pay later” loans: What are they, and do they affect your credit?

The credit bureaus are also changing how they handle installment loans. 

When you make a purchase online, you may be asked if you want to “buy now, pay later” (often called BNPL).

This form of financing, which allows shoppers to pay over time in installments, surged in popularity during the pandemic. “Buy now, pay later” loans are offered by lenders like Afterpay, Affirm, and Klarna. Some merchants and banks have now added their own BNPL products to the mix.

While the specifics vary, BNPL generally works like this: 

  • At checkout, you select the buy now, pay later option. 

  • You complete a near-instant approval process (it usually involves a “soft inquiry” on your credit report). 

  • You make an initial payment and agree to pay the remaining amount in a set number of installments. Often, you make four total payments over six weeks, so these are sometimes called “pay-in-four loans.”

Usually, there’s no interest on these loans. However, if you miss a payment, you’ll be hit with a late fee. 

In March, TransUnion estimated that as many as 100 million U.S. adults used BNPL financing at least once in the last 12 months. Yet most of these loans weren’t reported to the credit bureaus.

Late last year, the three main credit bureaus announced plans to tackle the issue. All are working to gather and report more information on consumers’ BNPL loans. However, they’re doing so in different ways:

  • Equifax is allowing lenders to choose whether they want BNPL data to be incorporated into the credit scores they request. When you check your own FICO or VantageScore through Equifax, BNPL data won’t be factored in.

  • Experian and TransUnion are storing the information in “specialty files.” BNPL loans could be listed on credit reports, but they aren’t currently impacting credit scores.

The three agencies plan to eventually include BNPL data in core credit scores, but it may be a few years before the industry and its scoring models are ready.

How could BNPL loans impact your credit score in the future? 

The biggest takeaway? While your credit score may not yet be impacted by BNPL loans, these loans can now show up on your credit file.

This means potential creditors may take BNPL activity into account when considering you for a new line of credit.

On-time payments will reflect positively, which could be a boon for people who have little to no credit history or those who are looking to rebuild their credit. On the flip side, late payments have the potential to make you look less reliable to lenders.

We’re here for you 

If you think the changes to medical debt reporting will improve your score, we recommend looking over your credit report to make sure the updates you're anticipating have been implemented. 

Note that updates may not appear right away. Sometimes, it takes a credit check from a financial institution to prompt a recalculation. 

If something doesn't seem right, you can file a dispute with TransUnion here.

Or, if you're a member and you suspect identity theft or fraud, give us a call.

We've seen many scam types play out firsthand — including “buy now, pay later” account takeover fraud. Our identity specialists can walk you through any issue you're experiencing and advise on next steps.

Credit score models may be changing — but our commitment to protecting you from identity theft isn’t.