A new rule being proposed by the Consumer Financial Protection Bureau (CPFB) would remove unpaid medical bills from an individual’s credit report when applying for a loan, a line of credit, or determining a consumer’s credit score.
According to the CFPB, around 15 million Americans have about $50 billion in outstanding medical bills in collections.
In 2022, the three largest credit bureaus — TransUnion, Equifax and Experian — began removing paid medical debts from consumers’ credit reports and in 2023 stopped including outstanding balances under $500.
Credit score company Vantage announced in 2022 that medical debt in collections would no longer be used to calculate consumers’ scores.
The Biden administration says it is behind this and that it would help millions of Americans land jobs, rent homes, or obtain car loans.
However, critics of this move claim that not paying off their medical debt will increase the cost for every consumer.
“Medical debt can be a problem for some people, but removing the debt from credit reports is teaming with negative consequences. It will discourage Americans from paying their debt or from buying insurance. It will raise consumer costs everywhere,” said Kim Strassel from the Wall Street Journal.
Some medical providers have said that hospitals and doctors may demand upfront payments from patients, such as credit card or loan payments.
Financial analysts recommend getting a part-time job and another source of income to help pay off medical debt. Others tell consumers with debt to consider debt consolidation or debt settlement.
It would let you pay off your debt at a more reasonable pace and help repair damage to your credit score.
However, the new plan could take another year to take effect, and the Trump presidency may change the Biden proposal.
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