Removal of Medical Debt from Credit Reports

A landmark CFPB rule, effective March 17, 2025, will exclude unpaid medical bills from consumer credit reports. This initiative seeks to prevent medical debt—a common consequence of unforeseen health issues—from hindering access to mortgages, car loans, or small business financing. The CFPB estimates that this change will eliminate $49 billion in medical debt from credit reports, benefiting over 15 million individuals and potentially increasing credit scores by an average of 20 points. This adjustment could result in approximately 22,000 additional mortgage approvals annually.

Transition to New Credit Scoring Models

Concurrently, the FHFA has mandated that Fannie Mae and Freddie Mac adopt two updated credit scoring models: FICO 10T and VantageScore 4.0. These models incorporate alternative data sources, such as rent, utilities, and telecom payment histories, offering a more comprehensive view of a consumer’s credit behavior. Notably, VantageScore 4.0 requires only one month of credit history to generate a score, potentially enabling millions of previously unscored consumers to establish credit profiles.

Shift from Tri-Merge to Bi-Merge Credit Reports

Another significant change is the transition from tri-merge to bi-merge credit reports for mortgage applications. Historically, lenders reviewed credit reports from all three major bureaus—Equifax, Experian, and TransUnion. Starting in the first quarter of 2025, lenders will be required to obtain reports from only two of these agencies. This shift aims to reduce costs and streamline the mortgage application process without compromising the accuracy of credit assessments.

Implications for Consumers and Lenders

Collectively, these reforms are designed to promote financial inclusion and provide a more accurate representation of consumers’ creditworthiness. By removing medical debt from credit evaluations and incorporating alternative payment histories, the changes aim to grant more individuals access to credit opportunities. However, consumers should remain vigilant in managing their debts, as unpaid obligations can still lead to collection efforts, even if they no longer impact credit scores.

Lenders will need to adapt to the new scoring models and reporting requirements, which may involve updating underwriting processes and retraining staff. While these adjustments may present initial challenges, the long-term benefits of a more inclusive and precise credit assessment system are expected to outweigh the transitional complexities.

The credit score changes taking effect in March 2025 represent a significant shift toward a more equitable and accurate financial system in the United States. Both consumers and lenders should prepare for these changes to fully leverage the opportunities they present. For consumers aiming to make the most of these new scoring methods, proactively managing and improving their credit scores remains essential. Companies specializing in credit improvement, such as Super Credit Repair, can offer valuable guidance to help individuals navigate these adjustments effectively and achieve their financial goals.

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Such is the case with California based Prime Marketing Holdings, which the CFPB had already been watching closely. Prime Marketing Holdings came to the attention of the CFPB as a direct result of the sanctioned actions of several businesses with which they are associated.

The allegations against the company included:

• Charging illegal advance fees
  • This included hundreds of dollars in “Set-up fees”
• Misleading consumers regarding benefits of credit repair services they offered
  • Misrepresentations including:
    • How much negative information could legitimately be removed from the credit report
    • How much of an increase in their score could be reasonably expected – often claiming 100 points or more with no way to substantiate the claim.
• Misrepresentation of the cost of the services they offered
  • Including not informing potential clients that there was a monthly fee involved for the services
• Failure to disclose terms and conditions of “money back guarantee”
  • Omitting from the discussion of the “money back guarantee” that a client would have to pay for services for at least six months before being eligible to claim against the guarantee.
• Other false or misleading claims
  • At times claiming they were a “mortgage affiliate”
  • At times representing that they could help a client obtain a mortgage

Dating from October 1, 2014 and continuing through at the least June 30, 2017, the company billed more than $20 million dollars for credit repair. This money was billed to approximately 50,000 clients of their credit repair services.

The CFPB has a proposed settlement – if approved by the U.S. District Court for the Central District of California – that seeks to ban Prime Marketing Holdings permanently from transacting further business in the consumer credit repair industry.

Additionally, the settlement requires Prime Marketing Holding to pay $150,000 in civil penalties.

Prime Marketing Holdings operated under several aliases, Park View Credit, National Credit Advisors, and Credit Experts to name a few.

CFPB is responsible for protecting consumers against the unscrupulous acts of the financial industry. Credit repair agencies are not immune to their policing as many credit repair agencies look for loopholes or simply disregard the law. Credit reporting agencies are not immune to the CFPB’s investigations either, although it is more common that their interaction is about an individual line item on a consumer’s credit report.

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