Proposal by the Biden Administration aims to remove medical debt from credit reports

LINCOLN, Neb. (KOLN) - Earlier this year, the Biden Administration announced a proposed new rule that would prevent credit report agencies from sharing medical debt with lenders.

The move would help close to 15 million Americans with a collective medical debt of $49 billion.

Elizabeth Renter, with NerdWallet, said those with the highest typical medical debt will be most impacted by the new rule. Some may even see a 20-point rise in their credit scores.

“This includes people who have gone periods throughout the year without health insurance,” Renter said. “People who had a hospital stay and people who have high ongoing expenses like those living with a chronic illness.”

The Biden administration said the point of the proposal was to stop punishing people for getting sick.

“The CFPB recognizes that people don’t often take on medical debt by choice," Renter added. “Something happens in your life, you have to go to the hospital and there’s a bill that results from that.”

CBS reported that some credit agencies, like Equifax and TransUnion, have already taken action by excluding medical debt on reports and bills less than $500.

Renter recommends tackling debt as much as you can as soon as you can. She said even if you can’t afford to pay it off, it is a good idea to reach out to collectors to make arrangements.