In a significant move, unpaid medical bills will no longer be reflected on credit reports, a decision made by the Biden administration as part of a new rule announced on Tuesday.
This action is expected to have a substantial impact, as it will eliminate around $49 billion in medical debt from the credit reports of over 15 million Americans.
Consequently, this means that lenders will not factor in this type of debt when making decisions regarding the approval of loans such as mortgages, auto loans, or small business loans.

According to the Consumer Financial Protection Bureau (CFPB), this adjustment is anticipated to boost credit scores by an average of 20 points, possibly resulting in around 22,000 additional mortgage approvals each year.
Vice President Kamala Harris, who spoke about the rule, stated that these changes could be “lifechanging” for a multitude of families across the country.
She emphasized that no individual should face economic hardships due to illness or a medical emergency.

Additionally, Harris revealed that various states and local authorities have utilized an extensive pandemic relief package from 2021 to wipe out more than $1 billion in medical debt for over 700,000 residents.
The administration had hinted at these regulatory updates in the fall of 2023.
The CFPB noted that medical debt is not an effective measure of a person’s ability to settle a loan.
The three main credit reporting organizations, Experian, Equifax, and TransUnion, previously announced that they would remove medical collection debts below $500 from consumer credit reports.
This latest rule aims to further address the issue of existing medical bills that are currently impacting credit scores and loan eligibility.