Medical Debt Banned from Credit Reports Can Be Life Changing

Last Tuesday, January 7, 2025, the Biden Administration made a big move to help millions of Americans struggling with medical debt. The Consumer Financial Protection Bureau (CFPB) announced that medical debt will no longer appear on credit reports, no matter how much is owed. Previously, only medical debt under $500 was excluded, but now, all medical bills will be removed from credit reports, a change that could have a huge impact on people’s credit scores and their financial futures.

For years, medical debt has been a major factor in damaging credit scores. It’s a problem that affects just about anyone, but especially Black communities, where people often face higher rates of health issues and have less access to affordable healthcare. Medical debt has made it harder for many to buy homes, get car loans, or even rent apartments. It’s also prevented some from qualifying for jobs that require a credit check. This change is a big step toward reducing those barriers and helping people move forward financially.

So, what’s going to change now? With medical debt no longer hurting credit scores, many people could see their credit scores go up by about 20 to 30 points on average. That might not sound like a lot, but for many, it could be the difference between being able to qualify for a loan or being stuck with high interest rates. And for those who have been struggling to get a mortgage or a car loan, this could open doors that were previously closed. The boost in credit score could also help folks qualify for better insurance rates or rental agreements.

This change, which is set to go into effect in July 2025, should offer some relief, but there are a couple of important things to keep in mind. First, the medical debt is only being removed from credit reports—it doesn’t erase the actual debt. You’d still need to pay it off, but at least it won’t keep hurting your credit score anymore. Also, it’s just medical debt that’s getting removed, so other types of debt, like credit card balances or student loans, will still show up on your report.

As for whether the Trump Administration or any future government could reverse this decision, it’s tough to say. While it’s always possible that changes could come down the line, it would likely take significant legal or legislative action to undo something like this, so it’s not something that can be flipped on a dime.

In the meantime, this new rule is a big win for those who have been stuck in financial limbo because of medical debt. With this change, more people will have the chance to get their credit scores up and start rebuilding their financial lives, giving them a much better shot at securing the loans and opportunities they need.