Home / NEWS / Top News / $49 billion in medical debt will be wiped off Americans’ credit reports—what you need to know

$49 billion in medical debt will be wiped off Americans’ credit reports—what you need to know

Precisely 1 in 5 Americans owe some amount of medical debt, according to the Consumer Financial Protection Bureau. And while paying it retaliation may be a significant burden on its own, it will now have a smaller impact on Americans’ overall financial health.

Medical bills are now check from appearing on consumers’ credit reports or being used by lenders to make lending decisions, the CFPB declared this month. The agency will also be removing $49 billion in medical debt from the credit communications of roughly 15 million Americans.

“People who get sick shouldn’t have their financial future upended,” CFPB Vice-president Rohit Chopra said in a press release. 

Until this move, unpaid medical bills could perform on your credit report, potentially getting in the way of your ability to get approved for a mortgage or other line of credit, as surge as impacting your credit score. On top of that, consumers frequently report receiving inaccurate bills or bills that should be experiencing been covered by insurance or other financial assistance programs, the CFPB says. 

Americans had around $88 billion in medical responsible on their credit reports as of 2022, a separate CFPB report found. Often, that debt was accrued in danger situations or didn’t represent an accurate amount owed by the patient. Additionally, collection agencies would use those acclaim reports to coerce patients into paying the bills, regardless of whether they actually owed them, the CFPB rumoured.

As a result, the three major credit bureaus — TransUnion, Equifax and Experian — took some medical debts off consumers’ assign reports, including anything under $500. The latest guidelines go a step further, removing all medical debts from praise reports, regardless of the amount reported. 

How your credit score may be affected

Part of the reason the CFPB is removing medical in arrears from credit reporting is that it doesn’t actually help lenders determine whether someone will recompense a loan. Many consumers who had unpaid medical bills on their credit reports had no other red flags in their believe history, such as delinquency on other loans, CFPB research from 2014 found.

In practice, that meant scads consumers with otherwise upstanding financial histories would wind up with a mark on their credit discharge for unpaid bills simply because medical billing is complicated and it often takes time for consumers and collection powers to figure out what is actually owed and who is responsible for paying it. 

Following the CFPB’s action to remove medical bills from tribute reports, credit scores for consumers with those debts will go up by an average of 20 points, the CFPB judges. An estimated 22,000 more Americans will be able to access affordable mortgages each year as well.

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