By On Jan. 7, 2025, the Consumer Financial Protection Bureau (CFPB) finalized a rule that will ban the inclusion of medical debt on credit reports and prohibit lenders from using medical information in their approval decisions.
The CFPB estimates the rule change will remove an estimated $49 billion in medical bills from the credit reports of about 15 million Americans. It will also improve privacy protections and prevent debt collectors from pressuring consumer to pay bills they don’t owe.
The bureau reports that, even though it leads to thousands of denied loan applications annually, medical debt is a poor predictor of a borrowers’ creditworthiness.
Americans with medical debt on their record could see their credit score rise by an average of 20 points as a result of the rule change, it added, and approximately 22,000 more mortgages will be approved each year.
Initially proposed in June 2024, the measure should take effect 60 days after it is published in the Federal Register.
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How does medical debt work?
Even if you have insurance, there are deductibles to meet and copays to cover. In addition, your policy may have a coverage limit or not pay for certain treatments.
After your insurer pays its share, your provider will bill you for the remainder. They may attempt to collect payment through letters, emails or phone calls. If you still haven’t paid after several months, the debt could be sold to a medical collections agency, which will try to collect it.
Medical debt can come from a variety of sources, including:
- Hospital visits
- Surgeries
- Doctor and dentist appointments
- Prescriptions
- Ambulance companies
Can medical debt affect your credit?
As long as your debt remains with your provider, it’s not reported to credit bureaus. After several months of non-payment, however, they may sell your debt to a collections agency.
In April 2023, the three main credit bureaus — Experian, TransUnion and Equifax — stopped including medical debt under $500 in credit reports. According to Equifax, the change eliminated nearly 70% of medical collection debt from credit reports.
Outstanding balances over $500, however, could still appear on your credit report for seven years, the same as any other kind of debt.
The two major credit scoring companies, FICO® and VantageScore, also changed how medical bills impact their scoring methods: VantageScore removed all medical debt from its calculations in January 2023, while FICO reduced the impact it has on your score.
In January 2025, the Consumer Finance Protection Bureau approved a new regulation that prevents nearly all medical debt from appearing on credit reports, no matter the amount.
According to the CFPB, the rule change:
- Removes exceptions that let lenders use information about medical debt to make determinations about someone’s creditworthiness.
- Prohibits credit reporting agencies from including medical debt on credit reports sent to creditors if the creditor is prohibited from considering it.
- Bars lenders from using medical devices like wheelchairs and prosthetic limbs as collateral for loans or from repossessing them if someone can’t repay the loan.
The rule change impacts past-due payments from a medical provider and money owed to a collections agency. If you’re behind on a personal loan or credit card that you used to pay your medical bills, it could still appear on your report.
Tips for tackling medical debt
If you’re swamped with medical bills, you have several options.
Negotiate your bill
“Providers are more than willing to settle on these things,” healthcare reform advocate Jeff Smedsrud told CNBC Select. “They’re willing to get paid something, rather than nothing. Review the charges together and try to negotiate a deal.“
Most hospitals have financial hardship policies, especially for patients who meet income requirements.
Set up a payment plan
Your provider may allow you to pay what you owe in monthly installments, Smedsrud said, possibly with no interest.
Research nonprofits and government agencies
Organizations like Undue Medical Debt and the Patient Advocate Foundation work with individuals to pay off medical debts.
If you qualify for Medicaid, you may be able to have medical bills covered retroactively.
Consider debt consolidation or debt settlement
The CFPB proposal is not expected to protect your credit score if you’re behind on a credit card you used to pay off a stiff medical bill. In that case, a debt consolidation loan could get you a lower interest rate and more time to settle the debt.
Debt settlement companies negotiate with collections agencies to get your balance reduced. You will pay a fee — as much as 25% of your balance — so make sure enrolling makes financial sense.
Accredited Debt Relief works with medical debt and claims it can get clients debt-free in as little as two years.
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