Americans are carrying more than $220 billion in medical debt, according to the Kaiser Family Foundation: Approximately 14 million people (6% of U.S. adults) owe more than $1,000 in medical bills , while 3 million people (1% of U.S. adults) owe more than $10,000.
How outstanding medical bills impact your credit score has shifted in recent years, but a proposed government regulation could remove medical debt from credit reports altogether.
Can medical debt affect your credit?
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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.
Unpaid medical debt in collections can be reported to credit bureaus after one year.
In April 2023, the three main credit bureaus — Experian, TransUnion and Equifax — stopped including medical debt under $500. According to Equifax, the change eliminated nearly 70% of medical collection debt from credit reports.
Outstanding balances over $500, however, can 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, have 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.
Used by 90% of lenders, FICO scores are comprised of five categories — including payment history and amount owed which account for a combined 65% of your score.
FICO score factors
| Credit score factors | % of FICO score |
|---|---|
| Payment history | 35% |
| Amounts owed | 30% |
| Lenght of credit history | 15% |
| Credit mix | 10% |
| New credit | 10% |
Source: myfico.com
A new rule banning medical debt from collections
In June 2024, the Consumer Finance Protection Bureau proposed a new regulation that would prevent nearly all medical debt from appearing on credit reports, no matter the amount.
Medical bills "have little to no predictive value when it comes to repaying other loans," the agency said in a statement.
If enacted, it would impact 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 bill, it could still appear on your report.)
According to the CFPB, the rule change would:
- Remove exceptions that let lenders use information about medical debt to make determinations about someone's creditworthiness.
- Prohibit credit reporting agencies from including medical debt on credit reports sent to creditors if the creditor is prohibited from considering it.
- Bar 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 CFPB told CNBC Select that it is reviewing public comments and is working toward finalizing and implementing the rule change sometime in 2025.
Some states aren't waiting: In 2023, both New York and Colorado enacted legislation that stopped unpaid medical debt from appearing on residents' credit reports. Virginia and Rhode Island followed suit in 2024 and other states have legislation in the works.
In 2024, New Jersey used leftover pandemic funds to erase $220 million in medical debt owed by over 127,000 residents.
In all, state and local governments are canceling about $7 billion in medical bills, using money from the American Rescue Plan Act.
That could erase medical debt for up to 3 million Americans, according to the White House.
Tips for tackling medical debt
Even if the rule is approved, it may be a while before it's implemented. 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.
Accredited Debt Relief
Cost
25% of enrolled debt
Highlights
Accredited Debt Relief has been in the business since 2011 and offers debt relief options to those with at least $10,000 of debt, including credit card debt, personal loan debt and medical debt.
App available
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FAQs
Does medical debt affect your credit score?
Medical debt won't affect your credit score until after a full year in collections, and even then only if it is more than $500. A proposal by the CFPB would prevent nearly all medical debt from being reported to credit bureaus, regardless of the amount.
How long does medical debt stay on your credit?
If a medical debt is sent to the credit bureaus, it will stay on your credit report for seven years.
Am I responsible for my spouse's medical debt?
Whether you're liable for a spouse's medical debt depends on the state where you live and other factors. If your spouse has died, you're generally not responsible for their debts.
Does medical debt disappear after seven years?
No, medical debt does not disappear after seven years. While the debt may no longer negatively affect your credit score after seven years, you'll still be responsible for paying it off.
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Meet our experts
At CNBC Select, we work with experts who have specialized knowledge and authority based on relevant training and/or experience. For this story, we interviewed Jeff Smedsrud, cofounder of the insurance marketplace HealthCare.com and a board member of the nonprofit Undue Medical Debt, which is focused on the elimination of personal medical debt.
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At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of personal finance. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.
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