Medical bills can significantly impact credit scores, but recent regulatory changes and ongoing legal battles have created a complex landscape for consumers. As of July 2025, a federal court reversed the Consumer Financial Protection Bureau’s (CFPB) rule that would have removed $49 billion in medical debt from 15 million Americans’ credit reports, meaning lenders and credit agencies can once again consider unpaid medical bills when assessing creditworthiness ^[8]. However, some protections remain: medical collections under $500 no longer appear on credit reports, and paid medical debts are excluded entirely ^[2]. Consumers also benefit from extended grace periods—up to 365 days—to resolve medical bills before they affect credit scores ^[2][5].

Key takeaways for handling medical bills affecting credit:

• Unpaid medical bills only impact credit if sent to collections—providers do not report them directly to credit bureaus ^[7][9].
• Recent rule reversals mean medical debt can still lower credit scores, but smaller debts (<$500) and paid collections are excluded ^[2][8].
• Negotiation and payment plans are critical tools—many providers offer financial assistance or reduced rates for uninsured or low-income patients ^[2][6].
• Disputing inaccuracies is free and can remove erroneous medical collections from credit reports ^[2][5].

Understanding Medical Debt’s Impact on Credit

Current Legal and Regulatory Landscape

The legal status of medical debt reporting has shifted dramatically in 2025. In January, the CFPB finalized a rule to ban medical bills from credit reports and prohibit lenders from using medical information in lending decisions, aiming to remove $49 billion in debt from 15 million Americans’ records ^[1]. The rule was set to improve credit scores by an average of 20 points and increase mortgage approval rates ^[3]. However, a federal court vacated this rule in July 2025 after a lawsuit argued the CFPB exceeded its authority, reinstating lenders’ ability to consider medical debt in credit assessments ^[8][10].

Despite this reversal, some protections persist:

• Medical collections under $500 are excluded from credit reports as of March 31, 2023 ^[2][7].
• Paid medical collections no longer appear on credit reports, regardless of the original amount ^[2][5].
• A 365-day grace period is now standard before unpaid medical bills can be reported to credit bureaus, up from 180 days previously ^[5][6].
• State-level protections vary: California, for example, prohibits reporting medical debt for 180 days post-billing and requires hospitals to notify patients before sending debts to collections ^[6].

The reversal of the CFPB rule disproportionately affects vulnerable groups. Medical debt is the largest source of collections debt in the U.S., with uninsured, Black, and Hispanic individuals bearing the highest burdens ^[4][7]. Approximately 15 million Americans have overdue medical bills totaling $49 billion, and 3 million owe over $10,000 ^[7]. Advocates argue that medical debt does not predict creditworthiness, as it often arises from unexpected illnesses or systemic issues like surprise billing ^[1][7].

Strategies to Mitigate Credit Damage from Medical Bills

Medical bills only impact credit scores after they are sent to collections, typically 90–365 days after the initial billing ^[5][9]. This delay provides a critical window to address debts before they harm credit. Consumers can take several proactive steps:

Negotiate with Providers and Insurers

• Request itemized bills to check for errors—studies show up to 80% of medical bills contain inaccuracies ^[6].
• Ask for financial assistance: Nonprofit hospitals are legally required to offer charity care, and many providers reduce bills for uninsured or low-income patients ^[2][6].
• Set up payment plans: Most providers allow interest-free installment plans, which prevent debts from being sent to collections ^[2][9].
• Use Health Reimbursement Arrangements (HRAs) if available through employers to cover out-of-pocket costs ^[5].

Dispute Inaccuracies on Credit Reports

• Obtain free credit reports from AnnualCreditReport.com to monitor medical collections ^[2].
• File disputes with credit bureaus (Experian, Equifax, TransUnion) if medical debts are incorrectly reported. The bureaus must investigate within 30 days ^[2][6].
• Leverage the 365-day grace period: Unpaid medical bills cannot be reported to credit bureaus for one year, giving consumers time to resolve disputes ^[5].

Explore Legal Protections and Assistance

• Surprise billing protections: The No Surprises Act (2022) bans unexpected out-of-network charges for emergency care and certain scheduled services ^[4].
• State-specific rights: In California, hospitals must notify patients before transferring debts to collectors, and medical debt cannot be reported for 180 days ^[6].
• Nonprofit help: Organizations like the Patient Advocate Foundation and RIP Medical Debt negotiate or eliminate medical debts for qualifying individuals ^[7].

For those already facing collections, paying off medical debts can improve credit scores, as paid collections are removed from reports ^[2]. However, the July 2025 court ruling means unpaid medical bills over $500 may still appear on credit reports for up to seven years ^[7][8]. Consumers in states with additional protections (e.g., Colorado, New York) may have further recourse, but federal safeguards are now limited.