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How keeping medical debt off credit reports will help Americans

On Behalf of | Jul 4, 2024 | Bankruptcy

There’s no question that much of Americans’ overall debt is medical debt. It’s also the type of debt most likely to be sent to a third-party collector. Debt sent to collections goes on a person’s credit report. There, it drives down their credit score.

In discussing the Biden administration’s efforts to get and keep medical debt off Americans’ credit reports, Vice President Kamala Harris recently noted, “Credit scores determine whether a person can buy a home, whether they can buy a car, rent an apartment, or own a small business.”

Why medical debt often doesn’t reflect a person’s creditworthiness

Moreover, it’s been found that medical debt isn’t a good indicator of whether a person is a good credit risk. That’s in part because medical expenses are largely out of people’s control. 

Further, some 80% of medical bills have been found to contain errors – including charges for services that weren’t even provided. Because most people can’t decipher the charges on their medical bills – and may not be healthy enough to even try – these errors often go unchallenged.

Proposed rule is “on track” to be final by year-end

The Biden administration has been working to get medical debt off of credit reports. The credit reporting companies already don’t include any medical debt under $500 on their reports. 

The Consumer Financial Protection Bureau (CFPB) has proposed a rule that would keep all medical debt off credit reports. According to Vice President Harris, that rule is “on track” to be final by the end of this year.

If all goes as planned, this will certainly provide some relief from collection calls and messages for many Americans. However, the change won’t lessen the debt itself. Medical debt can affect every other aspect of a family’s economic well-being. If you’re dealing with overwhelming medical debt, reviewing your debt relief options – including bankruptcy – can help you determine the best choice for you.


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