In the United States, medical debt is a uniquely pervasive issue, affecting an estimated 100 million citizens. With a staggering $220 billion in medical debt, it's no surprise that over half of all collection accounts are medical bills. These debts often arrive unexpectedly and are frequently incorrect, with more than 70% of people reporting errors. Unlike other debts, medical expenses are involuntary, making them a significant burden, especially for those with disabilities.
In July 2025, a pivotal court ruling allowed medical debt to remain on credit reports, overturning a policy from the administration. Judge Sean Jordan's decision marked a setback for the Consumer Financial Protection Bureau (CFPB), which had aimed to protect consumers from unfair credit practices. The ruling, supported by the Cornerstone Credit Union League, emphasized the need for lenders to assess a consumer's ability to pay, according to the Consumer Data Industry Association (CDIA).
The CFPB's now-overturned rule sought to eliminate medical bills from credit reports, preventing lenders from using such information in credit decisions. This regulation aimed to close a loophole that allowed debt collectors to coerce payments through credit reporting. The CFPB's research indicated that medical debt wasn't a reliable predictor of loan defaults. The rule was expected to boost credit scores by an average of 20 points and facilitate 22,000 additional affordable mortgages annually.
After the 2025 ruling, medical debt can still impact your credit score. It only gets reported if sold to a collection agency, with a one-year grace period before reporting. This gives you time to address the debt. Since April 2023, debts under $500 are excluded from credit reports, and settled debts no longer appear. However, unpaid balances over $500 can linger for seven years, affecting your credit like other debts.
While VantageScore removed medical debt from its calculations in 2023, FICO, used by over 90% of lenders, still considers it, albeit with less weight in its latest models. Medical debt can significantly damage your credit, potentially dropping a good score by up to 100 points. Understanding these nuances is crucial for managing your financial health and maintaining a strong credit profile.
To tackle medical debt, consider negotiating your bill with providers, who may offer discounts or interest-free payment plans. Seek help from nonprofits like Undue Medical Debt or Patient Advocate Foundation. Nonprofit hospitals must provide financial assistance programs, and Medicaid might cover bills retroactively. Debt consolidation or settlement could also be options, though they come with fees and risks.
Monitoring your credit is essential. Regularly check your credit report to ensure no incorrect medical collections are listed, and dispute any errors directly with the credit agency. To avoid future debt, review your insurance coverage, request cost estimates before treatment, opt for generic medications, or inquire about a Health Reimbursement Arrangement (HRA) from your employer.
Looking ahead, over a dozen states have introduced laws to prevent medical debt from affecting credit scores. Despite the 2025 ruling, the CFPB might appeal, though it's unlikely. Congress continues to push for legislative changes, with resolutions aiming to revoke the CFPB's Regulation V, potentially preventing similar future regulations. While the recent ruling reintroduces medical debt to credit reports, recent reforms still offer some protections, such as the one-year wait period and exclusion of smaller debts.
