In a groundbreaking move, the Biden administration has unveiled a new rule that will prohibit unpaid medical bills from appearing on credit reports. Announced Tuesday, the policy aims to remove a significant barrier preventing millions of Americans from accessing mortgages, car loans, and small business financing.

The Consumer Financial Protection Bureau (CFPB) estimates that this change will erase $49 billion in medical debt from the credit reports of more than 15 million Americans. By eliminating this financial burden, lenders will no longer consider medical debt when assessing loan eligibility. As a result, the average credit score of affected individuals is expected to rise by 20 points, potentially approving 22,000 additional mortgages annually.

“This change will be lifechanging for millions of families,” said Vice President Kamala Harris in her statement. “No one should be denied economic opportunity because they got sick or experienced a medical emergency.”

This new rule, a culmination of efforts announced in the fall of 2023, marks a major shift in how the financial system evaluates risk. According to the CFPB, medical debt is an unreliable indicator of a person’s ability to repay a loan. Last year, major credit reporting agencies—Experian, Equifax, and TransUnion—took a similar step by removing medical collections debt under $500 from credit reports. This latest measure addresses larger outstanding balances that were still impacting consumer credit scores.

Additionally, Harris highlighted another success story: states and local governments have utilized pandemic-era aid from a sweeping 2021 relief package to wipe out over $1 billion in medical debt for more than 700,000 Americans.

This historic policy is expected to expand access to economic opportunities for those who have long been penalized for medical emergencies. It’s a crucial step forward in a broader effort to create a more equitable financial landscape for all.