How does medical debt affect your credit?

Americans are carrying a staggering $220 billion in medical debt, according to the National Institutes of Health, with more than a third (36%) of U.S. households currently carrying some form of debt on past-due bills, payment plans or loans for healthcare expenses.

Arguing that they're not a good predictor of someone's creditworthiness, consumer advocates have pushed for medical bills to be removed from the credit reports used to tabulate credit scores.

The issue has become a political hot potato: In January 2025, the Consumer Financial Protection Bureau finalized a rule that would have ended the inclusion of medical debt in credit reports and prohibited lenders from using medical information in their approval decisions. But just a few months later, a federal court in Texas vacated the CFPB regulation, concluding it was outside the agency's jurisdiction.

Here's what you need to know about how medical debt affects your credit score.

Get back on track with help from a debt settlement company

Healthcare is expensive, even if you have insurance. There are deductibles to meet and copays to cover, not to mention coverage limits and exclusions.

After your insurer pays its share, your healthcare provider will bill you for the remaining balance. If you don't submit payment promptly, it might attempt to collect payment via letters, emails or phone calls. After several months, the debt can be sold to a medical collections agency.

Medical debt can come from a variety of sources, including:

• Hospital visits
• Surgeries
• Doctor and dentist appointments
• Prescriptions
• Ambulance companies

As long as your debt remains with your provider, it's not reported to TransUnion, Equifax and Experian, the three main credit bureaus. After several months of non-payment, however, your provider may sell your debt to a collections agency, which will continue to pursue payment.

In April 2023, Experian, TransUnion and Equifax all stopped including medical debt under $500 in their credit reports. According to Equifax, the change eliminated nearly 70% of medical collection debt from reports.

Outstanding balances over $500, however, can still appear on your credit report for seven years, the same as any other kind of debt.

Efforts by the Consumer Financial Protection Bureau to prohibit any medical debt from being included on credit reports and impacting credit scores was blocked by federal courts. As a result, unpaid medical expenses over $500 can still appear on your credit report.

Depending on the credit scoring models used, they can have a major impact on your score.

VantageScore removed all medical debt from its calculations in January 2023. But FICO, which is used by more than 90% of lenders, still factors medical bills into its scoring, although it gives them less weight.

FICO 9 and 10, the company's latest scoring models, give less weight to unpaid medical collections than earlier versions, and paid accounts are disregarded.

Paid medical collections are still kept off credit reports, as are unpaid medical bills under $500.

There's also a one-year waiting period before unpaid medical collections appear on credit reports, giving consumers time to address the debt. 

If you're swamped with medical bills, you have several options.

1. 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.

2. Set up a payment plan

Your provider may allow you to pay what you owe in monthly installments, Smedsrud said, possibly with no interest.

3. Look into 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. 

4. Consider debt consolidation or debt settlement

If you're behind on a credit card you used to pay off a stiff medical bill, 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 could pay as much as 25% of your balance for their services, 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.

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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