Medical debt can still appear on credit reports, judge rules
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A judge has blocked a Biden era ban on medical debt in credit reports. Now, technically, the rule from the Consumer Financial Protection Bureau never took effect, but if it had, it would have stopped medical bills from appearing on credit reports and barred lenders from using that data to make lending decisions. The CFPB says removing medical bill information could have wiped $49 billion off credit reports of about 15 million Americans and increased their credit scores by an average of 20 points. But a judge ruled in favor of two trade associations that argued the CFPB overstepped its authority in issuing that rule. This comes at a precarious time in health care, with millions of Americans expected to lose health insurance by 2034 due to changes in Medicaid under President Trump's new tax bill. So how does medical debt and your credit report work without this rule? Say you get medical care. The provider will send your bill to insurance, and you're responsible for whatever your insurance does not cover. If you don't pay that balance, the provider will likely send you reminders. If you still don't pay, they may send that debt to a collection agency. Once it's with the agency, they own that debt. They'll start calling and sending you letters, and they may report it to credit bureaus. Once reported, it can appear on your credit report. Now, it may not hurt your credit score right away. Medical debt must be one year old before it shows up on your credit report. Debt under $500 is not reported. And 14 states have provisions in place to remove medical collection debt from credit reports. But still, consumers are left with the responsibility to stay on top of changes to their credit as they face mounting bills.
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