Unpaid medical bills will no longer impact credit reports, thanks to a final rule announced by the Biden administration. This rule, issued by the Consumer Financial Protection Bureau, is set to remove $49 billion in medical debt from the credit reports of over 15 million Americans. As a result, lenders will no longer consider this debt when making loan decisions.
The removal of medical debt is expected to raise credit scores by an average of 20 points, potentially leading to the approval of 22,000 additional mortgages annually. Vice President Kamala Harris described the rule as 'lifechanging' for millions of families, emphasizing that economic opportunities should not be denied due to medical emergencies.
In addition to the new rule, states and local governments have utilized pandemic-era aid to eliminate over $1 billion in medical debt for more than 700,000 Americans. The Biden administration had announced plans for this rule in fall 2023.
The CFPB highlighted that medical debt is not a reliable indicator of an individual's ability to repay a loan. Last year, the three major credit reporting agencies - Experian, Equifax, and TransUnion - had already started removing medical collections debt under $500 from U.S. consumer credit reports.
This latest rule from the Biden administration will address outstanding medical bills on credit reports, providing relief to many individuals and families across the country.
