Americans Won’t Have to Worry About Unpaid Medical Bills Damaging Credit Reports
The Biden administration is finalizing a rule that will end the inclusion of medical debt on credit reports and ban lenders from using certain medical information in loan decisions. This change is expected to remove an estimated $49 billion in medical bills from the credit reports of about 15 million people. Medical debt is currently the most common collection item on credit reports and has become a major problem for many Americans, with some estimating that more than 100 million people have medical debt.
Under the new rule, medical devices such as wheelchairs or prosthetic limbs will no longer be used as collateral for loans, and lenders will no longer be able to repossess these devices if patients are unable to repay the loans. While lenders can continue to consider medical information in certain situations, this change is expected to help many people avoid credit damage caused by medical debt.
The change is also expected to lead to the approval of about 22,000 additional mortgages every year. In addition, people with medical debt on their credit reports could receive a 20-point boost, on average, in their credit score. Consumer advocates are hailing the change, saying it will help millions of families who are struggling to manage medical debt and prevent it from ruining their credit scores.
Credit reporting agencies and debt collectors have been critical of the rule, however, arguing that it will undermine the accuracy and completeness of credit reports. Despite this, many consumer advocates are celebrating the change, saying it will provide relief to millions of people who have unfairly had their credit impacted simply because they got sick.
The rule takes effect 60 days after it is published in the Federal Register. However, Republican lawmakers who control Capitol Hill and the incoming Trump administration may still try to repeal the rule, which has traditionally happened when a new president takes office.