Effective January 1, 2025, a significant change in California’s credit reporting landscape will take effect, as Governor Gavin Newsom signed a bill prohibiting medical collections from being factored into credit reports. This legislation aims to alleviate the burden of medical debt on consumers and facilitate greater access to credit, particularly for those whose purchasing opportunities may have been previously hampered by unpaid medical bills.
Understanding the Impact of Medical Debt
Medical collections can negatively affect credit scores, making it challenging for individuals to secure financing for major purchases, including homes. Many borrowers may have faced obstacles in the past due to outstanding medical debts, which were often reported to credit agencies and used against them when seeking loans.
With this new bill, borrowers can look forward to an improved credit landscape. Medical collections will no longer be a barrier, allowing those previously affected to reconsider their eligibility for mortgage loans.
A Call to Action for Real Estate Agents
This legislation presents a unique opportunity for real estate agents and their clients. If you have clients who were previously deterred from purchasing a home due to medical collections impacting their credit scores, now is the time to revisit those conversations. Encourage them to check their credit reports and assess their current standing.
With the removal of medical collections from credit reports, many borrowers may find themselves in a better position to qualify for financing. This could open doors for clients who thought homeownership was out of reach due to past medical expenses.
Next Steps for Borrowers
If you or someone you know has experienced challenges in the past due to medical collections, consider the following steps:
- Check Your Credit Report: Obtain a free credit report and review it for any outstanding medical collections.
- Consult with a Lender: Reach out to a mortgage lender to discuss your current financial situation. They can help you understand how the new legislation affects your credit standing.
- Explore Financing Options: With improved credit potential, explore various mortgage options that may now be available to you.
- Reconnect with Your Real Estate Agent: If you’ve been hesitant to pursue homeownership, reconnect with your real estate agent to discuss new opportunities that may be within reach.
The new legislation signed by Governor Newsom marks a positive step towards reducing the impact of medical debt on consumers’ financial health. As we approach the effective date of January 1, 2025, both real estate agents and borrowers should seize this opportunity to reassess past challenges and consider the path toward homeownership once more.
With the burden of medical collections lifted, many will find that their dreams of owning a home are closer than ever. Let’s work together to help our clients achieve their goals and navigate this new landscape in real estate financing.
Have questions?
If you or anyone you know has questions about financing or the current housing market, your expert Los Angeles mortgage brokers at Peak Finance are here to help. Contact us today at info@peakfinanceco.com.