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Unpaid medical bills will no longer hinder individuals from obtaining mortgages, car loans, or small business loans as they will no longer be included in credit reports.
The Biden administration has announced a final rule that will eliminate the inclusion of unpaid medical bills on credit reports. This is significant because these unpaid medical bills have the potential to hinder individuals from obtaining mortgages, car loans, or small business loans.
According to the Consumer Financial Protection Bureau, more than 15 million Americans will have $49 billion in medical debt removed from their credit reports. This rule will prevent lenders from considering medical debt when making loan decisions.
According to the bureau, the credit score increase is projected to average 20 points, potentially resulting in the approval of an additional 22,000 mortgages annually. In a statement, Vice President Kamala Harris emphasized the life-changing impact this rule would have on millions of families.
She emphasized that nobody should be deprived of economic opportunities just because they fell ill or faced a medical emergency.
Harris made an announcement regarding the use of a comprehensive pandemic relief package in 2021 by states and local governments. This aid package has been instrumental in eradicating over $1 billion in medical debt for more than 700,000 individuals.
In the fall of 2023, the administration unveiled its plans for the rule.
According to the Consumer Financial Protection Bureau (CFPB), they have found that medical debt is not a reliable indicator of a person’s loan repayment capability. In fact, last year, the three major credit reporting agencies, Experian, Equifax, and TransUnion, made the decision to eliminate medical collections debt below $500 from American consumer credit reports.
The Biden administration is introducing a new rule to address the unresolved debts that are reflected on credit reports.