New rule removes medical debt from credit reports and no longer factor into your score
NORTH CAROLINA (WTVD) -- A major change when it comes to medical debt and it could improve credit scores for millions of Americans. The Consumer Financial Protection Bureau finalized a new rule Tuesday to remove medical debt from consumer credit reports.
The government watchdog says it can no longer be factored into your credit score, but you still are responsible for paying the medical debt. The agency says this new rule will remove an estimated $49 billion in unpaid medical bills from the credit reports of about 15 million Americans.
Thomas Nitzsche with Money Management International says, "It doesn't mean that just because it's not in your credit report. It doesn't mean that they can't take you to court sue. You may get a garnishment. There's still collection activity that can happen. It just doesn't include putting it on your credit report and those are two very important distinctions to make."
Nitzsche says it's key with this new rule, consumers with medical debt can still take action.
"It needs to be treated carefully, and that people still need to go through the process of applying for charity care if they might qualify for it, setting up payment plans if the bill is correct and they actually owe it trying to work with the provider. it doesn't mean you can just throw every medical bill out the window that you ever get."
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Potential lawsuits or congressional action could delay this new rule's implementation in March. Debt collection industry groups like the Association of Credit and Collection Professionals have opposed the change, saying it would result in reduced consequences for not paying your bills, which in turn will reduce access to credit and health care for those that need it most."
Several credit reporting agencies have already taken some voluntary steps to remove medical debt from their reports. The Consumer Financial Protection Bureau says that this rule could boost borrowers' credit scores by an average of 20 points which can help you qualify for mortgages and other kinds of loans.
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