Major legal changes to Credit Scores for Rockville, Md Residents!
A federal judge has ruled in favor of plaintiffs to strike down a 3 year ruling prohibiting the use of Medical Judgements and Collections in the determination of FICO and Vantagescore credit scoring models. This will then allow these to be recomputed in the scoring models, potentially impacting a large number of consumers and their borrowing options.
- CFPB Rule Struck Down: A Consumer Financial Protection Bureau (CFPB) rule, designed to remove medical debt from credit reports and prevent lenders from considering it in credit decisions, was struck down by a federal judge in Texas on July 11, 2025.
- Reason for Ruling: The judge determined that the CFPB had exceeded its authority under the Fair Credit Reporting Act (FCRA), which governs how credit reporting agencies collect and share financial data.
- Impact on Credit Scores: This ruling means that unpaid medical bills will continue to appear on credit reports and potentially negatively affect credit scores, according to AARP. The CFPB had estimated that the rule, if implemented, would have increased credit scores by an average of 20 points for millions of Americans.
- Background: The CFPB initially proposed the rule in June 2023, aiming to address the issue of medical debt's impact on financial stability, particularly since medical debt is often incurred due to unexpected circumstances and may not be a reliable indicator of creditworthiness. The rule was finalized in January, but its implementation was delayed by legal challenges.
- Credit Bureaus and State Actions: Prior to the CFPB's action, the three major credit reporting agencies (Experian, TransUnion, and Equifax) had already voluntarily implemented changes, such as removing medical debts under $500 or those less than a year old from credit reports. Some states, like California, Colorado, and New York, have also passed laws that restrict or prohibit the inclusion of medical debt on credit reports.
* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.