Unlocking Opportunity: New Credit Rule Opens Doors to Mortgages & Loans

Exciting News for American Borrowers!

NEW YORK — In a groundbreaking move, lenders across the U.S. will no longer factor unpaid medical bills into credit history evaluations for mortgages, car loans, or business loans. This change, finalized by the Consumer Financial Protection Bureau, is set to transform the financial landscape for countless families.

By eliminating medical debts from credit reports, millions of families could see their credit scores surge by an astonishing average of 20 points! The CFPB’s research shows that unpaid medical bills do not accurately reflect a borrower’s ability to repay loans, yet they have unjustly led to mortgage denials.

Last year, the big three credit reporting agencies—Experian, Equifax, and TransUnion—took a step in the right direction by removing medical collections under $500 from reports. Now, the CFPB is raising the bar by banning all outstanding medical debts from appearing on credit reports and preventing lenders from using this information.

This rule will take effect 60 days after its publication in the Federal Register, although changes are anticipated under the incoming administration.

Here’s What You Need to Know:

Who Will Benefit?

According to the CFPB, this new rule will remove a staggering $49 million in medical debt from the credit reports of 15 million Americans. Shockingly, one in five Americans has at least one medical debt collection account on their credit report, with medical debts accounting for over half of all collections listed.

This issue disproportionately impacts communities of color: 28% of Black Americans and 22% of Latino Americans carry medical debt, compared to 17% of white Americans. While the national credit reporting agencies previously agreed to disregard smaller medical debts, many families face much larger amounts that have been holding them back.

What’s the Impact for Consumers?

With this bold move, the CFPB estimates that millions will gain greater access to loans, potentially leading to an additional 22,000 approved mortgages each year! Imagine the boost in credit scores—those with outstanding medical bills could see an average rise of 20 points.

This rule also enhances privacy protections, ensuring debt collectors can’t use credit reports to pressure individuals into paying debts they might not owe. Frequently, consumers encounter inaccurate bills or are billed for services that should have been covered by insurance.

Additionally, lenders will be prohibited from using information about medical devices, such as prosthetic limbs, as loan collateral. This is a significant step towards protecting vulnerable borrowers.

What Are Advocates Saying?

Healthcare advocates are celebrating this monumental decision. “This is fantastic news for everyday Americans,” says Carrie Joy Grimes, founder of a personal finance organization. “Medical debt doesn’t reflect poor financial choices—anyone can face unexpected health issues. Now, Americans can focus on getting back on their feet rather than being burdened by medical debt.”

Patricia Kelmar, health care campaigns director for a leading public interest group, emphasizes that this rule will support “financially responsible families grappling with medical debt due to unforeseen health challenges, costly out-of-pocket expenses, and billing errors.”

What to Do If You Get a Surprise Medical Bill?

With one in five Americans facing medical debt totaling $88 billion, it’s essential to know how to navigate unexpected bills. A recent study found that around 20% of U.S. households report having medical debt, impacting 43 million credit reports.

Here are some steps to find relief:

• Explore Charity Care: Nonprofit hospitals are legally required to offer reduced or waived bills based on your income. Search online for your hospital’s “charity care” or “financial assistance policy” to see if you qualify.
• Utilize the No Surprises Act: This federal law mandates that insurance companies cover out-of-network services in emergencies. If you’re charged more than expected for in-network services, you might be able to dispute the bill.
• Request an Itemized Bill: Medical billing can be complex and full of errors. An itemized bill provides the codes for all services rendered, making it easier to spot discrepancies.
• Compare Costs: Review your bill against your insurance company’s estimates for fairness. If you find inconsistencies, you may reduce your costs or even take action in small claims court.
• Check Your Insurance Explanation of Benefits: Ensure that your hospital bill matches what your insurance covers. Any discrepancies can give you leverage to negotiate your bill.
• Appeal Insurance Claims: If you believe your bills warrant full coverage, don’t hesitate to appeal with your insurance company or seek help from your state’s insurance commissioner.

These proactive steps can empower you to tackle your medical bills head-on and reclaim your financial freedom!