Credit scores are complicated for many Americans–as many as 22% don’t even have a FICO score, and 11% are considered credit invisible. This means that credit can be a significant barrier for entrepreneurs looking to build a successful business.
But we have good news! What’s included in credit scores is changing; starting in July 2022, credit bureaus will treat medical collections differently. This change will positively affect financial inclusion, removing some of the obstacles that may be in the way for business owners. Many may now be eligible for a loan, credit card, lease, or other credit score-based products they previously were denied for. The new policy is as follows:
- Medical debt that’s been paid will stop appearing on credit reports from all three bureaus (Equifax, Transunion, and Experian) even if it’s been reported for years.
- Currently, the time a medical collection is reported on credit is six months. It will now increase to a year, giving people additional time to negotiate a payment plan or arrive at another solution.
- Taking effect in the first six months of 2023, credit bureaus will no longer report medical collections under $500 on credit reports.
A poll from Bankrate showed that 21% of Americans had a credit application rejected because of a credit score that was too low. However, minorities are disproportionately affected by bad credit. More than half of Black Americans have no credit or a low to fair credit score, compared to 37% of their white counterparts. Making this change to medical collections is revolutionary in helping individuals and small businesses achieve the financing they need to thrive, especially for businesses run by minority entrepreneurs.
Ascendus serves low- to moderate-income business owners through our focus on credit education and financial inclusion. Its products are designed specifically for people who have been denied access to traditional banking products and services. Ascendus prioritizes working with small businesses, the backbone of many underrepresented communities. By providing access to credit and financial education, Ascendus helps empower these community business people to build better lives for themselves and their families. If you, or a business you know, would like to explore credit offers from Ascendus, you can learn more about our various products here.