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Medical Debt Will Now Be Wiped From Credit Reports

The Consumer Financial Protection Bureau (CFPB) announced on January 7, 2025 that it has finalized a rule to remove close to $49 billion in medical bills from the credit reports of about 15 million Americans. Consumers will see this rule take effect on March 17, 2025.

This is a follow-up to action that was already taken by the three major credit reporting bureaus (Experian, Equifax and TransUnion) in May 2023. At that time, the bureaus began removing some medical debt including collections under $500, and all paid medical debts.

FICO and VantageScore, which generate the two most popular consumer credit scores, also began reducing the influence of medical bills on their score calculations.

What’s new in the CFPB’s final rule:

— The credit reporting agencies will no longer include any medical debt information on credit reports and credit scores sent to lenders.

— Lenders can no longer access medical information and medical debt, giving debt collectors less recourse to go after people who might be in the midst of a dispute regarding health bills.

— Lenders can no longer consider any medical information to make credit decisions.

The exceptions to the rule allow lenders to consider medical information if they are verifying a borrower’s request for a medical-based forbearance, or if the consumer is seeking a loan specifically to pay medical expenses.

[Related:How Repairing Credit Works]

What This Means for You

A credit report is a snapshot of your financial life, and the information contained on it is used to calculate your credit score.

Lenders rely on credit reports and scores to determine how creditworthy you might be as a borrower, and they make lending decisions based largely upon that information.

Those going through the unfortunate situation of dealing with large medical bills — including those who are disputing bills while health insurance claims are being resubmitted — have sometimes faced challenges getting approved for other financial products.

“Medical debt has damaged the financial record of tens of millions for far too long, causing credit rejections and pushing costs even higher for Americans struggling financially,” Chi Chi Wu, senior attorney at the National Consumer Law Center, said in a press release.

[Related:U.S. News Editors Share How to Avoid Credit Score Drops in the New Year]

Be Mindful of How You Handle Medical Debt

While it’s a win for consumers that unpaid medical bills will no longer appear on credit reports, keep in mind that there could still be a credit impact depending on how you handle those bills.

[Related:This Is Why You Might Be Responsible For Paying Your Parents’ Medical Debts]

For example, if you decide to use a credit card or line of credit to pay for an elective medical procedure, the medical bill to the provider is considered paid and the debt shifts to that credit line.

Therefore, it will appear on your credit report and be part of your credit score calculations. The same is true if you take a personal loan to cover medical expenses.

On the other hand, if you work out a payment plan to pay the medical provider directly, that information will not be reported.

More from U.S. News

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6 Easy Ways to Pay Off Debt

How to Negotiate With Debt Collectors

Medical Debt Will Now Be Wiped From Credit Reports originally appeared on usnews.com

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