If you've been keeping an eye on financial news, you might have heard about a significant change impacting credit reports. In a move that could benefit millions of Americans, medical debt will no longer appear on credit reports, thanks to a recent rule finalized by the White House. This game-changing decision is set to improve credit scores and open up new opportunities for those burdened by medical expenses.

What This Means for You

Medical debt has long been a challenge for many, but this new rule removes approximately $49 billion in medical bills from the credit reports of about 15 million people. Even more importantly, lenders will no longer factor medical debt into their lending decisions.

As Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra put it, "People who get sick shouldn't have their financial future upended."

The Impact on Homeownership

This policy shift is expected to have a significant impact on the housing market. The CFPB estimates that:

  • 22,000 additional mortgages could be approved every year.

  • Credit scores for individuals with medical debt could improve by an average of 20 points.

For anyone dreaming of homeownership but held back by their credit score, this is fantastic news. A higher credit score can mean better mortgage terms, lower interest rates, and a smoother path to buying your dream home.

A Follow-Up to Previous Changes

This rule builds on earlier efforts to minimize the impact of medical debt. In 2023, the three major credit bureaus—Equifax, Experian, and TransUnion—announced that medical debts under $500 would no longer appear on credit reports. Together, these changes are making it easier for Americans to achieve financial stability and pursue major life goals, like purchasing a home.

Why This Matters for Buyers and Sellers

As credit scores improve nationwide, more buyers may enter the market, creating new opportunities for sellers as well. If you've been thinking about buying or selling a home, this is an exciting time to make your move.

Source: Inspired by reporting from NBC News.