What to Know About Medical Debt on Your Credit Report

What to Know About Medical Debt on Your Credit Report

A new rule will help Americans’ credit scores.

Good news for anyone who has been saddled by medical debt: A new ruling by the Consumer Financial Protection Bureau (CFPB) wipes it away.

What is the New Rule?

The new rule will eliminate any medical debt currently listed on your credit report. Overall, the CFPB estimates that the ruling will eliminate about $15 billion in medical debt for about 6 million Americans. The goal behind the ruling is to make sure no one is denied important financial goals — like buying a house — because they got sick and were unable to pay medical bills.

What is the credit score impact? The ruling is estimated to raise the credit scores of those consumers impacted by about 20 points. That’s huge. This new ruling is also in line with the three credit bureaus’ decision last year to not factor medical debt less than $500. 

Why the New Rule?

One of the main reasons for the CFPB’s move is that medical debt is not like other debt, and is therefore not a good indicator of someone’s financial health. Getting sick, especially when it means you have to pay a hospital bill, is in many cases, out of your control. Whereas racking up credit card debt is more indicative of financial behavior. 

Do One Thing: Any time you receive a medical bill, review it carefully. Ask for an itemized bill to check it for anything out of the ordinary.

Chris O'Shea

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