A sweeping change to credit rules will soon erase medical debt from credit reports, bringing relief to many individuals across the country.
Key Facts:
– The Biden administration finalized a rule preventing unpaid medical bills from appearing on credit reports.
– The rule takes effect 60 days after publication in the Federal Register.
– Officials estimate $49 billion in unpaid medical bills will be removed from credit reports for 15 million people.
– The Consumer Financial Protection Bureau (CFPB) projects that around 22,000 additional affordable mortgages will be approved each year once the rule is active.
– Individuals with medical debt on their credit reports may see their scores rise by about 20 points.
The Rest of The Story:
This new Biden administration rule is meant to address how unpaid or disputed medical debts negatively affect people’s ability to secure loans, such as mortgages or car financing.
The administration and the CFPB emphasize that this plan will reduce pressure on Americans who might have been forced to pay bills they did not actually owe.
Under the new guidelines, lenders will be barred from including certain medical details when deciding whether to approve or reject a loan.
Consumers will still have to verify legitimate medical expenses if they are requesting a loan to cover treatment, but they will no longer need to worry about inaccurate bills tarnishing their credit histories.
The administration highlights that patients often ended up with harmful credit marks through no fault of their own.
In many cases, insurance coverage or billing mistakes caused the debts.
By removing these medical items from credit reports, people can avoid needless obstacles when trying to purchase a home or start a small business.
Before this rule, some major credit reporting agencies already began to eliminate smaller medical debts under $500.
Still, 15 million Americans had unpaid medical bills in collections showing on their credit reports, according to the CFPB.
This initiative aims to reduce that number significantly.
Debt collectors also face new restrictions under the rule.
They can no longer use credit reporting as leverage to push people to pay contested bills.
Medical debt will no longer be allowed to be a factor when lenders consider applicants for loans, according to a new rule finalized this week by the Consumer Financial Protection Bureau.
Read more: https://t.co/OpPwGZptTh pic.twitter.com/oncvYqKVDr— Forbes (@Forbes) January 7, 2025
The Bottom Line:
Many Americans who were held back by medical debt can soon breathe easier.
By removing erroneous or unpaid medical bills from credit reports, the administration believes more people can qualify for loans.
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This development is expected to help families, homebuyers, and other individuals achieve their financial goals.