How Medical Debt Affects Your Credit Report: Understanding Recent Changes

9/1/2025

Medical debt has long been a significant concern for many Americans, often impacting credit scores and, consequently, access to loans, housing, and even employment opportunities. Recent legislative and regulatory changes have aimed to address this issue, though not without controversy.

Medical debt can affect your credit report, but recent changes have lessened the impact, especially for smaller amounts and paid debts. Paid medical debt is no longer reported, and unpaid medical debt under $500 is also generally not included. Outstanding balances over $500 can still appear on your report and affect your score, though some experts say they may be given less weight in some scoring models.

Reporting of Medical Debt on Credit Reports

Traditionally, medical debt is reported on credit reports when it goes unpaid and is sent to collections. This information is then used by lenders to assess creditworthiness. However, medical debt differs from other types of debt in several ways:

Unpredictability: Medical emergencies are often unexpected, leading to unforeseen expenses.

Insurance Complications: Billing errors or disputes with insurance providers can result in unpaid bills that are not the fault of the patient.

Financial Hardship: Even insured individuals may struggle with high deductibles or out-of-network charges.

Recognizing these differences in January 2025, the Consumer Financial Protection Bureau (CFPB) proposed a rule to remove medical debt from credit reports, arguing that it does not accurately reflect a person's creditworthiness.

This rule aimed to remove approximately $49 billion in medical debt from the credit reports of about 15 million Americans, potentially increasing credit scores by an average of 20 points and leading to more affordable mortgages. In addition, it aimed to prohibit lenders from considering medical debt when making credit decisions and, it would increase privacy protections and prevent coercive debt collection practices.

However, in July 2025, a federal judge in Texas struck down this rule, stating that the CFPB had overstepped its authority under the Fair Credit Reporting Act. The judge ruled that medical debt could still be reported, provided privacy protections are in place.

State-Level Action

Despite the federal setback, several states have enacted their own laws to protect consumers from the negative impacts of medical debt on credit reports. As of mid-2025, at least 14 states have laws prohibiting the inclusion of medical debt on credit reports, with more states likely to follow with similar legislation.

What This Means for You

If you have medical debt on your credit report, it's essential to:

Check Your Credit Report: Regularly review your credit reports for accuracy.

Dispute Inaccuracies: If you find errors, dispute them with the credit bureaus.

Seek Professional Advice: Consider consulting with a credit counselor or financial advisor if your debt is becoming overwhelming.

While federal protections have been rolled back, state laws may still offer some relief. Stay informed about your state's regulations and seek assistance if needed.

Lori from Linked in

Lori Stratford is the Digital Marketing Manager at Navicore Solutions. She promotes the reach of Navicore's financial education to the public through social media and blog content.

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