Medical debt creeping back onto credit reports: What to do

If you are confused about whether medical debt appears on credit reports: Well, join the club.

The truth is, even credit experts are struggling to keep up, as government edicts and judicial decisions bounce the issue back-and-forth like a tennis ball.

So how exactly are consumers supposed to keep up?

“Many are confused and worried about how medical debt will affect them,” says Beverly Harzog, author of books like “Confessions of a Credit Junkie” and host of the podcast “Your Personal Economy”.

“Consumers need to be vigilant and follow the news to understand the impact on their scores. Knowing what the rules are will allow them to make better financial decisions about their medical debt situation.”

So here’s the latest: The federal Consumer Financial Protection Bureau had previously ruled that medical debt would no longer appear on credit reports, affecting 15 million consumers with $49 billion in outstanding medical debt, and potentially boosting their credit scores by an average of 20 points.

But the current administration (and trade groups) fought that ruling in the courts, and recently won, meaning that some medical debts can indeed pop up on credit histories. Also worrisome news for consumers: That federal ruling pre-empts state-level laws on the matter, such as those on the books in California and New York.

But here is something that consumers also need to know. The major credit agencies (Experian, Equifax and TransUnion) have their own guidelines, rolled out in 2023, which are unaffected by new court rulings.

“Unpaid medical collection debt amounts under $500 are no longer included on consumers’ credit reports, and unpaid medical collection debt greater than $500 doesn’t appear on a credit report until it is at least one year old,” says Dan Smith, president and CEO of the Consumer Data Industry Association. “That process will remain in place.”

Practically, that means that around 70% of all medical debt doesn’t appear on credit reports – even if the previous CFPB measure has been tossed. 

Unhealthy finances

So why is medical debt such a hot-button issue? Just look at how prevalent it is: In one study, 66.5% of those filing for bankruptcy cited medical issues as a contributing factor (either medical bills, or health issues leading to job and income loss).

Consumer advocacy groups hold that medical debts aren’t an accurate predictor of whether someone is historically a good credit risk or not, since health crises can befall anyone at any time.

Trade groups, for their part, say creditors should have access to people’s complete financial picture – including medical debt – before making lending decisions.

From the borrower’s standpoint, the advice is clear: If the amount involved is over $500, and the debt has been past due for many months, you should be laser focused on attacking it before the clock strikes 12 (months).

Because if it does eventually land on your credit report, missed payments can drop your credit score by 100 points or more.

Before it gets to that point, you should brush up on your negotiation tactics, and talk to doctors and hospitals about getting that number down. If it means they get a portion of what they’re owed -- right away, or over time on a payment plan that works for you -- that is a more attractive prospect than having to write it off altogether. 

In one recent survey by The Commonwealth Fund, nearly 40% of those who challenged their medical bills got them reduced or eliminated.

“You can absolutely negotiate when it comes to paying your medical bills,” says Harzog. “This is really important if you’re underinsured. If you can pay cash, they’ll usually give a discount. If you can pay only a small amount per month, ask for a discount and for a payment plan. Do this during the first year, so your account doesn’t go to collections. That’s when it could possibly impact your score.”

After all, when you’re facing health troubles, the last thing you need is financial worries to compound the situation and make it worse. 

So arm yourself with information about which medical debts can land on your credit report, and when; be proactive about attacking that debt; and get creative by negotiating with medical providers, and potentially getting those debts reduced.Also be aware of what tools are at your disposable to help improve your credit score in case it does drop. One option is to consider a secured credit card, which often have 100% approval rates, such as Current’s Build Card. It may build your credit score* and minimize the risks of adding more debt.

That way you can focus on your own healing, and not be worried about your credit report landing in intensive care as well.


*Individual results may vary. Using your credit card responsibly may allow you to improve your credit score. Credit building depends on various factors, including your payment history, credit utilization, length of credit history, and other financial activities.