Does Medical Debt Affect Your Credit Score?

Does medical debt affect your credit score? For too long, that question has weighed on Americans.

Fortunately, in a significant policy shift, the Consumer Financial Protection Bureau (CFPB) finalized a new rule on January 7, 2025, that will transform how medical debt impacts Americans’ credit scores.

In short: The landmark decision effectively removes medical bills from credit reports used by lenders nationwide. It’s a potentially game-changing win that puts the power back where it belongs: in your hands.

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Can medical bills affect your credit score?

Traditionally, unpaid medical bills that went to collections could appear on your credit report and significantly lower your credit score. Even a single medical collection account could drop your score by 50 to 100 points, making it harder to qualify for loans or credit cards.

However, the Consumer Financial Protection Bureau (CFPB) has recently finalized a rule that will remove medical bills from credit reports entirely.

Under this new regulation, approximately 15 million Americans will see an estimated $49 billion in medical bills eliminated from their credit reports. For individuals with existing medical debt on their reports, the CFPB anticipates an average credit score increase of about 20 points.

The CFPB’s research ultimately determined that medical debt is a poor indicator of whether someone will repay other types of loans.

According to CFPB Director Rohit Chopra, the new rule closes a loophole that allowed debt collectors to “abuse the credit reporting system to coerce people into paying medical bills they may not even owe.

He also went on to say that “people who get sick shouldn’t have their financial future upended” – we like the sound of that.

What the new CFPB medical debt credit report rule means for you

The practical effects of the new CFPB medical debt credit report rule could be major:

• The CFPB estimates that as many as 22,000 additional affordable mortgages could be approved annually
• Medical information can no longer be used by lenders in credit decisions
• Credit reporting agencies are prohibited from including medical debt information on reports sent to lenders
• Medical devices (like prosthetic limbs) can no longer be required as collateral for loans

What if my medical bill is still appearing on my credit report?

After the new CFPB rule takes effect, medical bills should not appear on your credit report. The new legislation should take effect 60 days after publication in the Federal Register. After that time period, if you still spot a medical bill or debt on your credit report, here’s what to do:

👉🏻 File a dispute: Contact the credit reporting agencies (Equifax, Experian, and TransUnion) directly to dispute the medical debt. Under the Fair Credit Reporting Act, they’re required to investigate disputes within 30 days.

👉🏻 Submit a complaint to the CFPB: If the credit bureaus don’t remove the medical debt after your dispute, file a complaint through the CFPB’s consumer complaint portal (consumerfinance.gov/complaint).

👉🏻 Request updated credit report: After the rule takes effect, request free copies of your credit reports from annualcreditreport.com to verify that medical debts have been removed.

👉🏻 Contact the medical provider: Some providers may be willing to remove the debt from your credit report if you work out a payment plan or if there was an insurance billing error.

👉🏻 Don’t be afraid to follow up: Legislation is in your favor to an extent. According to the Fair Credit Reporting Act, credit bureaus must follow up on credit reporting errors and disputes. They must also investigate disputes from consumers about inaccuracies in their credit reports within 30 days.

💡Pro tip: Be ready to provide any additional documentation needed. Keep following up until the medical bills on your credit reports are resolved!

What do I do if my medical bill was wrongfully sent to collections?

If your medical bill was wrongly sent to collections, you can dispute it with the debt collections agency and the credit bureaus. When you receive a collection notice, you should contact them and provide the requested documentation to clear the debt. 

Don’t let a billing mistake rain on your financial parade — you’ve got the receipts to fight back and keep your credit score glowing. When cleared, that will also remove the medical bills on credit reports.

What should I do if I can’t pay my medical bills?

If you can’t pay your medical bills because you’ve received a bill you can’t afford, or your bills are already in collections, you have resources that could help. Here are possible actions you can take to get control of medical debt:

✅ Negotiate directly: You always have the option to negotiate a payment plan or reduced rate with your health care provider. Talk to your doctor’s office or hospital about a discount for paying in full or a discount for noninsured patients. They might also let you make a down payment and pay the rest over time. If your bill is in collections, you can try to negotiate with the collection agency. They may be willing to work with you to create a resolution, since they most likely bought the debt much less than the full value.  

✅ Get financial assistance: You might qualify for help from federal, state, or local financial assistance programs or nonprofit organizations. Some providers have income-driven hardship plans.

✅ Get a medical billing advocate: A medical billing advocate will negotiate on your behalf with insurance companies and health care providers. Of course, you’ll have to pay for this service. But if they do their job well, you could save thousands of dollars by working with a reputable advocate. Check customer reviews to choose a good advocate. 

✅ Borrow from family: You could borrow from a family member or friend to pay off the medical debt. Just be sure to have a clear repayment plan in place to avoid straining the relationship. 

✅ Consider a 0% APR credit card: As a last resort, if your debt is an amount you could put on a credit card, and you’ve got a good credit score to get a new credit card, a 0% APR intro offer can be a solution. In that case, you can pay off the debt during the 12 to 18 months of the intro offer. However, make sure you have a clear plan to pay off the debt on time; otherwise, the high credit card APR can make the debt even more unmanageable. Remember that putting the medical debt on a credit card will convert it into regular debt, so it will start affecting your credit scores.

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Avoiding Medical Debt

No one plans for medical debt, so avoiding it is more a matter of layering protections for your family ahead of time. If you can get it, ensure you have good health insurance, including vision and dental insurance. If you don’t have insurance through work, consider getting Medicare or other government-assisted insurance.

You can also consider a Health Savings Account (HSA), make a budget to save more each month or find some of the best savings accounts to start your emergency fund. With persistence and planning, you can deal with any medical debt you have now and protect yourself from future debt.  

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