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A Major Shift in Consumer Credit Protection

Medical debt has long been the largest source of debt reported to credit bureaus—affecting millions of Americans' ability to rent, buy a car, qualify for a mortgage, or even get a job. In Washington, that’s changing for good.

Effective July 27, 2025, Washington State has officially banned the reporting of medical debt to credit reporting agencies. This consumer protection was enacted under Senate Bill 5480, signed into law on April 22, 2025, with bipartisan support.

Legal Details: Senate Bill 5480 and New RCW Provisions

Senate Bill 5480 adds new protections under RCW 19.16.100 and Chapter 70.54 RCW:

• Health care providers and facilities are prohibited from reporting medical debt to any consumer credit agency.
• If such debt is reported in violation of the law, it is considered void and unenforceable.
• Any medical debt contract entered into on or after July 27, 2025 must contain a specific disclosure stating this prohibition. If not, the contract itself is invalid under state law.

This means Washingtonians will no longer see medical debt—past or future—factored into their credit reports.

Why This Matters for Homebuyers

According to a report by KFF (Kaiser Family Foundation), 6.5% of Washington residents—roughly 380,000 people—currently carry medical debt, with a median amount of $1,350. The Consumer Financial Protection Bureau (CFPB) notes that medical debt is often unplanned, inconsistently reported, and disproportionately affects consumers’ access to credit.

By removing this barrier from credit reports, the state hopes to:

• Improve access to mortgages and car loans
• Reduce credit score penalties for medical hardship
• Prevent discrimination in employment and rental applications

What Borrowers Should Know

While this new law is a major win, here’s what current and future mortgage applicants should keep in mind:

• Medical collections currently on your credit report may remain until reporting agencies fully implement changes post-July 27.
• Lenders may still consider other negative credit items, such as late payments, high balances, or non-medical collections.
• You’re still responsible for paying any outstanding medical bills—this law simply ensures they won’t impact your credit score.

Action Steps for Buyers & Realtors

Whether you're looking to buy, refinance, or advise clients, here’s what you can do:

• Check your credit report at AnnualCreditReport.com
• Dispute any medical debt reported after July 27, 2025
• Consult with a mortgage professional to see how these changes may help your loan eligibility

We’re Here to Help

At Pacific Coast Financial LLC, we’re committed to helping Washington residents understand how legislative changes like SB 5480 impact their mortgage journey. We work closely with our clients and partners to navigate these transitions with clarity, integrity, and results.

Have questions or want to review your mortgage readiness?  Call us at 206-393-0684 to schedule your personalized consultation.

Disclaimers: This article is for educational purposes only and does not constitute legal or credit advice. Always consult a licensed attorney or credit counselor for specific questions related to your situation.