Harris Pushes to Remove Medical Debt from Credit Reports, Raising Credit Scores for 15M Americans

US Vice President Kamala Harris announced a final ruling by the Consumer Financial Protection Bureau (CFPB) that the records of £39.08 billion ($49 billion) in unpaid medical bills will be removed from the credit reports of 15 million Americans.

The move will ensure that Americans are no longer penalised for medical debt records on credit reports. "Today, we are building on this meaningful work by announcing an unprecedented final rule that will make it so medical debt is no longer included in your credit score," Harris stated in a White House press release published on 7th January.

The CFPB rule will ensure that there will be "zero Americans with medical debt listed on their credit reports," down from 46 million at the beginning of the decade.

"No one should be denied economic opportunity because they got sick or experienced a medical emergency," Harris said, in part. "We also reduced the burden of medical debt by increasing pathways to forgiveness and cracking down on predatory debt collection tactics."

She also highlighted that several states and localities utilised American Rescue Plan (ARP) funds to facilitate the eradication of more than £797.92 million ($1 billion) in medical debt for over 700,000 US citizens, as part of the £5.58 billion ($7 billion) debt forgiveness plan by 2026.

Ruling To Ease Access To Credit

The latest CFPB ruling is part of Harris' agenda to direct states to lower the medical debt burden, which typically limits US households' access to credit even for basic living expenses.

"This will be life-changing for millions of families, making it easier for them to be approved for a car loan, a home loan, or a small-business loan," Harris said.

Although credit bureaus like Experian, TransUnion, and Equifax announced in early 2022 that they would not report unpaid medical debt under $500 or those less than a year old on credit reports, massive debt levels reflecting on credit reports still affect consumers' chances of being approved for a loan.

A CFPB study revealed that medical bills are poor indicators of an individual's creditworthiness, but lenders have continued to consider outstanding medical debt to determine a person's ability to repay a loan on time.

Harris' Move To Boost Credit Scores Significantly

Harris' announcement will likely increase the credit scores of individuals affected by medical debt credit report entries by an average of 20 points. This is expected to result in the approval of almost 22,000 extra mortgages annually.

It is important to note that while the new legislation will prevent medical debt from showing up on credit reports for countless people, boosting their credit health, outstanding medical loans will still need to be repaid.

Furthermore, individuals using credit cards to pay medical bills will continue to see those unpaid debts on their reports since this payment method is not covered under the latest ruling.