Jordan Ellis
Medical debt is a common issue in the United States, with nearly one in five households reporting some form of overdue medical debt. In the past, unpaid medical bills were furnished to credit reporting companies, affecting credit scores and contributing to thousands of denied loan and mortgage applications. However, recent changes in rules and regulations have been implemented to address this issue. As of January 2025, a new federal rule prevents medical debt from appearing on credit reports and prohibits lenders from using medical information in their approval decisions. This rule change is expected to positively impact the credit scores and lending opportunities of millions of Americans.
| Characteristics | Values |
|---|---|
| Medical bills appearing on credit reports | Medical bills generally don't appear on credit reports until they've gone unpaid for at least a year. |
| Medical debt under $500 | Medical collections under $500 shouldn't appear on credit reports. |
| Medical debt over $500 | Unpaid medical collection accounts over $500 can appear on credit reports and affect credit scores for up to seven years. |
| Medical debt and credit score | Medical bills will not affect your credit as long as you pay them. However, unpaid medical debt handled differently than other types of consumer debt. |
| Hospitals reporting to credit bureaus | Since most healthcare providers don't report to credit bureaus, your debt would have to be sold to a collection agency before it appears on your credit report. |
| Medical debt and privacy | The CFPB rule removes medical debt from credit reports, improves privacy protections, and prevents debt collectors from pressuring consumers to pay bills they don't owe. |
| Medical debt and credit score calculation | VantageScore removes all medical debt from its calculations, while FICO reduces the impact on the credit score. |
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What You'll Learn
Medical bills under $500 won't appear on your credit report
In April 2023, the three main credit bureaus—Experian, TransUnion, and Equifax—stopped including medical debt under $500 in credit reports. This change eliminated nearly 70% of medical collection debt from credit reports. Outstanding balances over $500 can appear on your credit report for up to seven years, just like any other debt.
Credit bureaus provide a grace period because medical bills are a unique type of debt. Even if you have health insurance and the bill is for a covered expense, you may have to wait months for your insurance company to approve and issue payment to the healthcare provider. A simple coding or billing error can slow the payment process even more. The 365-day grace period gives you some time to correct any errors and allows the insurance company's payment time to make its way through the system. It also gives you time to set up a payment plan if necessary.
Unpaid medical bills may take a long time to show up on your credit report, but the damage to your credit score can be long-lasting once they do. If you know you won't be able to pay off medical bills on time, don't panic. Health care providers are often willing to work with you because they would rather get some of what they're owed than get nothing at all. For example, some providers offer substantial discounts if you agree to pay a lower amount in full or if you make a large down payment and then pay the rest over time.
In January 2025, the Consumer Finance Protection Bureau approved a new regulation that prevents nearly all medical debt from appearing on credit reports, regardless of the amount. This rule change impacts past-due payments from a medical provider and money owed to a collections agency. However, if you are behind on a loan payment or credit card bill that you used to pay for medical care, it could still impact your credit score.
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Hospitals don't usually report to credit bureaus directly
As of January 2025, a new federal rule has been implemented to prevent medical debt from being reported to credit bureaus. This rule was finalized by the Consumer Financial Protection Bureau (CFPB) and bans the inclusion of medical debt on credit reports used by lenders. It also prohibits lenders from using medical information in their lending decisions.
However, prior to this rule, hospitals and medical providers did not usually report to credit bureaus directly. Instead, unpaid medical debt was handled differently from other types of consumer debt. Typically, medical providers would sell the debt to a collection agency after a certain number of days, and it would be this collection agency that would report to the credit bureaus. The waiting period for medical collections to appear on credit files was previously six months, but this increased to a year in 2023. This grace period was put in place because medical bills are a unique type of debt, and insurance payments can take months to be approved and issued.
The three main credit bureaus, Experian, TransUnion, and Equifax, agreed in 2023 that they would stop including medical debt under $500 in credit reports. This change removed around 70% of medical collection debt from credit reports. However, outstanding balances over $500 could still appear on credit reports for up to seven years, just like any other kind of debt.
In summary, hospitals generally did not report to credit bureaus directly prior to the new federal rule implemented in 2025. Instead, they would sell unpaid debt to collection agencies, which would then report to the credit bureaus after a grace period.
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Unpaid medical debt can remain on your report for up to seven years
Unpaid medical debt can have a significant impact on your credit score and report. While medical bills will not affect your credit as long as you pay them, unpaid medical debt is handled differently from other types of consumer debt. Most healthcare providers do not report to credit bureaus, so your debt would have to be sold to a collection agency before it appears on your credit report. However, even after your bill goes to collections, the account might not show up on your credit report right away, or possibly ever.
The three main credit bureaus—Experian, TransUnion, and Equifax—provide a 365-day grace period to resolve any medical debt before the collection account appears in your credit history. This grace period gives you time to correct any errors, set up a payment plan, or negotiate with your healthcare provider. Healthcare providers are often willing to negotiate or offer discounts to receive some payment rather than none at all.
If your unpaid medical debt is over $500, it can appear on your credit report and affect your credit score for up to seven years. However, once you or your insurance company pay off the medical bill that was in collections, the account will be removed from your credit report, which can positively impact your credit.
It is important to note that, as of January 2025, a new federal rule has been enacted by the Consumer Financial Protection Bureau (CFPB) that prevents nearly all medical debt from appearing on credit reports, regardless of the amount. This rule also prohibits lenders from using medical information in their approval decisions, increasing privacy protections for consumers.
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Medical debt is a poor indicator of creditworthiness
The Consumer Financial Protection Bureau (CFPB) has implemented a rule that will ban the inclusion of medical debt on credit reports and prohibit lenders from using medical information in their approval decisions. This rule will remove an estimated $49 billion in medical bills from the credit reports of about 15 million Americans. The rule change will also improve privacy protections and prevent debt collectors from pressuring consumers to pay bills they don't owe.
The CFPB has found that medical debt is a poor indicator of a borrower's creditworthiness. It has little predictive value in determining a borrower's ability to repay other debts. This is because medical debt is often the result of unforeseen circumstances, such as accidents or sudden illnesses, rather than financial mismanagement. Additionally, consumers frequently report receiving inaccurate bills or being asked to pay bills that should have been covered by insurance or financial assistance programs.
Furthermore, medical debt can disproportionately affect individuals with lower incomes or those facing unexpected financial hardships. These individuals may be unable to pay high medical bills, not because of poor financial management but due to a lack of financial resources. As a result, medical debt may not accurately reflect a person's ability to manage their finances or repay loans.
In addition, medical debt can be complex and confusing, with varying insurance coverage, deductibles, and out-of-pocket expenses. A person may receive medical treatment believing it to be covered by insurance, only to later receive a large bill due to policy limitations or exclusions. This can result in unexpected medical debt that does not reflect the individual's financial responsibility.
While medical debt over a certain amount can still appear on credit reports and impact credit scores, the CFPB's rule is a step towards recognizing that medical debt is not a reliable indicator of creditworthiness. It is important for individuals to prioritize paying off legitimate medical debt to maintain a positive credit score. However, the CFPB's rule provides some relief and protection for those facing medical debt, ensuring that it has a lesser impact on their financial future.
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You can dispute medical debt on your report
As of January 2025, a new federal rule has been implemented to prevent medical debt from appearing on credit reports. This rule was finalized by the Consumer Financial Protection Bureau (CFPB) and bans the inclusion of medical debt information on credit reports and credit scores sent to lenders.
However, if you do find yourself with medical debt on your credit report, you can dispute it. Medical debt can be disputed if it falls under one of the following three categories:
- If the collection account balance is under $500, it won't appear on your credit report and won't affect your score.
- If the debt is not accurate or is the result of fraud, you can contact the credit bureaus to dispute it.
- If you believe the medical bill was placed on your credit report by mistake, you can challenge it.
To dispute medical debt on your report, you will need to contact the credit bureaus and file a dispute. This process is free, but you will need to file disputes separately with each bureau listing the incorrect information. You will also need to contact the collection agency and the medical provider. It is important to provide evidence to support your claim, such as records from the collection agency, insurance company, or healthcare provider.
It is worth noting that even if you successfully dispute the medical debt and have it removed from your credit report, the damage to your credit score may still be long-lasting. Therefore, it is always best to pay off legitimate medical debt as soon as possible and, if needed, set up a payment plan with your healthcare provider.
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Frequently asked questions
Hospitals in Georgia, US, are unlikely to report to credit bureaus as long as the debt remains with the provider. However, they may sell the debt to a collection agency if it remains unpaid for several months.
You can check your credit report for any outstanding medical bills. The three main credit bureaus (Experian, TransUnion, and Equifax) offer free online credit reports through AnnualCreditReport.com.
The collection account can appear on your credit report and stay there for up to seven years if left unpaid. However, you have a 365-day grace period to resolve any medical debt before it appears on your credit history.
Ensure that you pay your medical bills on time. If you are unable to pay, consider negotiating with the hospital for a payment plan or financial assistance programs.
You have the right to dispute any inaccuracies or fraudulent medical collections on your credit report. File a dispute with the credit bureau and provide evidence to support your claim.
