Recent changes have significantly reduced the impact of medical debt on mortgage qualification. Paid medical collections are removed from credit reports entirely.
Unpaid medical collections under 00 are also removed. Only unpaid medical collections over 00 remain, and they have less impact than other types of collections.
Most lenders have relaxed their guidelines for medical debt. FHA and Conventional both treat medical debt more leniently than other collections.
Recent Changes
As of 2022, the major credit bureaus removed paid medical collections from credit reports and reduced the reporting period for unpaid medical collections. This has helped millions of borrowers.
Current Rules
Paid medical collections: removed from reports. Unpaid medical under 00: removed. Unpaid medical over 00: remains but with reduced scoring impact. New medical collections: reported after 1 year.
Impact on Score
Medical collections now have less impact on credit scores than before due to the 2022 changes. However, large unpaid medical collections can still lower your score.
What Lenders Look For
Lenders look for: the total amount of medical debt, whether it's in collections, and your payment history on non-medical accounts. Most lenders are understanding about medical debt.
Strategies
Strategy: pay small medical collections (under 00 disappears). Negotiate larger ones. Set up payment plans for large balances. If the debt is in dispute, work with the provider to resolve it.
Medical vs Other Debt
Medical debt is treated much more leniently than credit card debt or other collections. Lenders understand that medical issues are often beyond your control.