This landmark Biden administration rule eliminates medical debt from consumer credit reports, significantly impacting credit scores. The new regulation prevents lenders from using unpaid medical bills to assess creditworthiness. This change aims to alleviate the financial burden of medical debt on millions of Americans and promote fairer lending practices. The impact is expected to improve access to credit for those previously hindered by medical debt.
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A new Biden administration rule will eliminate $49 billion in medical debt from the credit reports of over 15 million Americans, effectively preventing its use in loan applications. This action, praised by Vice President Harris as “lifechanging,” is projected to boost credit scores by an average of 20 points and facilitate thousands of additional mortgage approvals annually. The rule addresses the issue of medical debt’s inaccurate prediction of repayment ability, building upon prior efforts by credit reporting agencies to remove smaller medical debts. The initiative complements over $1 billion in state and local medical debt relief already enacted using pandemic aid funds.
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The Biden administration’s final rule eliminates unpaid medical debt from credit reports, impacting over 15 million Americans and removing $49 billion in debt. This change, expected to boost credit scores by an average of 20 points, will prevent lenders from using medical debt in loan decisions. The rule follows the credit bureaus’ prior action of removing medical collections under $500 and is projected to increase mortgage approvals significantly. This action aims to address the inequity of individuals facing financial hardship due to medical expenses.
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John Q. Hosedrinker