Unpaid Medical Bills Will No Longer Impact Credit Reports, Paving the Way for Greater Access to Loans
In a significant policy shift, unpaid medical bills will no longer be included in credit reports, potentially eliminating barriers for individuals seeking mortgages, car loans, and small business financing, as announced by the Biden administration.
The new rule from the Consumer Financial Protection Bureau (CFPB) aims to remove approximately $49 billion in medical debt from the credit reports of over 15 million Americans. This move is expected to allow lenders to make loan issuance decisions without considering such financial burdens.
Experts estimate that this change could improve average credit scores by 20 points and result in the approval of an additional 22,000 mortgages annually. Officials highlight the transformative impact this will have on countless families.
The administration emphasized that denying economic opportunities due to health-related financial challenges is unjust. Additionally, states and localities have utilized a comprehensive pandemic relief program to alleviate more than $1 billion in medical debt for over 700,000 individuals.
The CFPB previously indicated that medical debt is not a reliable indicator of a person’s capacity to repay loans. Moreover, major credit reporting agencies announced last year that they would exclude medical collections under $500 from consumer credit reports.
This groundbreaking rule is set to revolutionize the landscape of credit reporting by removing the stigma of medical debt from individuals’ financial profiles.
