A New Era for Credit Reports: Medical Debt No Longer a Barrier
In a groundbreaking move, the Biden administration has announced a final rule that will revolutionize the way medical debt affects credit reports. As of today, unpaid medical bills will no longer be a hindrance to securing mortgages, car loans, or small business loans.
A Weight Lifted Off Millions of Americans
The Consumer Financial Protection Bureau (CFPB) estimates that this rule will remove a staggering $49 billion in medical debt from the credit reports of over 15 million Americans. This means that lenders will no longer be able to consider medical debt when deciding whether to issue a loan. The impact is expected to be significant, with credit scores predicted to rise by an average of 20 points.
A Life-Changing Impact
Vice President Kamala Harris hailed the rule as “life-changing” for millions of families. “No one should be denied economic opportunity because they got sick or experienced a medical emergency,” she emphasized. This move is a crucial step towards ensuring that medical debt does not stand in the way of financial freedom.
A Broader Effort to Address Medical Debt
The administration’s announcement comes on the heels of a successful initiative by states and local governments to eliminate over $1 billion in medical debt for more than 700,000 Americans. This effort was made possible through a sweeping 2021 pandemic-era aid package.
Why Medical Debt Is a Poor Predictor
The CFPB has long argued that medical debt is a poor indicator of an individual’s ability to repay a loan. This stance is supported by the fact that Experian, Equifax, and TransUnion – the three national credit reporting agencies – have already removed medical collections debt under $500 from U.S. consumer credit reports.
A New Chapter for Credit Reports
The Biden administration’s rule marks a significant shift in the way credit reports are viewed and used. By removing the burden of medical debt, millions of Americans will now have a fairer shot at achieving their financial goals.
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