Medical debt often informs lender decisions, so removing these debts from credit reports can help borrowers qualify for more financing.
Medical bills may soon be removed from many credit reports. The Consumer Financial Protection Bureau just proposed a rule that would eliminate medical debt from credit reports in an attempt to prevent debt collectors from using the reporting system to get people to pay. The rule also intends to create higher levels of privacy for individuals with medical debt and increase the number of loan approvals.
The CFPB conducted research before proposing the new rule and found that medical bills on an individual’s credit report don’t correlate with not paying other loans. In fact, the opposite is true. Medical debts often lead to less accurate lending practices. Medical debt leaving reports is likely to help lenders as well as borrowers. It will likely result in more approved lending applications.
Consumers are protecting their credit scores but aren’t willing to stop taking on debt they need for major purchases. Buy now, pay later options are growing in popularity, largely because they don’t always run a credit check, a PYMNTS study found. Over 19% of BNPL customers chose to use BNPL options because these companies often don’t run hard credit checks when approving applicants.
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