Key takeaways
- As of March 2025, new federal rules will remove all medical debt from consumer credit reports, including unpaid balances over $500.
- Previously, medical debt over $500 could appear on credit reports after one year in collections, but this will no longer be the case once the rule takes effect.
- If you have difficulties paying your medical bills, consider negotiating with your healthcare provider and insurance company. You could also turn to outside organizations for financial help or hire a medical billing advocate.
In January 2025, the Consumer Financial Protection Bureau (CFPB) announced a new rule that will remove all medical debt from credit reports. Set to take effect in March 2025, this rule is expected to erase an estimated $49 billion in unpaid medical bills from credit reports, potentially boosting credit scores by an average of 20 points for approximately 15 million Americans.
This sweeping change builds on the April 2023 decision by the three major credit bureaus to stop reporting medical debt under $500, as well as previous decisions that banned paid-off medical debts from credit reports and required collection agencies to wait at least a year to report any medical debt to the credit bureaus. When this final rule goes into effect, all medical debt — regardless of amount or payment status — will no longer appear on consumer credit reports.
This update marks a significant win for consumers, especially those recovering from unexpected medical expenses. The resulting credit score boost could make it easier for borrowers to get approved for mortgages, loans and credit cards.
When do the new rules go into effect?
The law is scheduled to go into effect in March 2025. However, legal challenges may delay this timeline. Debt collection industry groups are pushing back, arguing that the rule reduces accountability for unpaid bills while consumer advocates emphasize the positive impact on borrowers’ financial stability. The challenges could go through the judicial system, with federal courts potentially hearing the cases.
This process could cause delays but will not reverse the CFPB’s decision unless a court ruling deems it invalid. Ultimately, it will be up to the courts to decide whether to uphold or block the rule based on legal arguments. Unless a court issues an injunction (a temporary hold), the rule will proceed as planned in March 2025.
Any existing medical debts on your credit report will remain there and affect your credit score until the rule becomes official.
How to deal with outstanding medical debt
Paying off your medical debts is still a good idea, even if they won’t appear on your credit report. While the new rule eliminates the reporting of medical debt, it does not erase the debt itself. Creditors and collection agencies can still pursue payment through other means, including lawsuits, wage garnishment, or additional collection efforts.
With this in mind, the following tips may help you successfully deal with your medical debts.
Review your outstanding medical bills
If you have had to deal with medical issues, carefully review your bill and find out exactly what amount you are responsible for and what your insurance will pick up. You should also watch out for any billing errors and contact your medical provider’s billing department right away to discuss any potential issues.
Negotiate with your medical provider
If you cannot pay the bill right away, you may attempt to negotiate a settlement or payment plan with your medical provider. Medical billing advocates can also negotiate on your behalf. You may be able to get some help paying your bills from nonprofits, religious organizations or government assistance.
If your debt goes to collections, check your credit report to make sure it’s reported correctly. If you do find a mistake, follow up with the collections agency to sort out the matter. If that doesn’t work, you can dispute the mistake with the credit reporting agency.
Explore other payment options
Unexpected medical bills can strain your finances, leaving you searching for ways to manage the costs. If the options above don’t work for you, consider using a credit card with a promotional 0 percent APR to spread out payments without accruing interest. However, make sure you have a solid plan to pay off the balance before the promotional period ends. Otherwise, you may end up paying a high interest rate on the remaining amount.
If a 0 percent APR credit card isn’t an option, an emergency personal loan could be a practical alternative. While you won’t avoid interest entirely, personal loans often offer fixed interest rates that are typically lower than standard credit card rates, potentially making them a more predictable and manageable choice.
The bottom line
The recent rule changes removing medical debt from credit reports provide a much-needed reprieve for millions of Americans, allowing them to protect their credit scores from the impact of unexpected healthcare costs. However, these changes don’t erase the medical debts themselves, so it’s still important to address outstanding bills.
If you’re facing medical billing challenges, start by working with your healthcare provider and insurance company to resolve disputes or set up payment plans. Nonprofit organizations and medical billing advocates may also offer valuable assistance in negotiating or reducing your bills.
For those who need additional options, a 0 percent APR credit card or a personal loan may help make large medical expenses more manageable by breaking them into smaller payments. Just remember, these tools come with financial responsibilities. Have a clear repayment plan to avoid further debt or interest charges.
Ultimately, while these policy changes are a step forward in reducing the financial burden of medical debt, it’s still necessary to stay proactive and informed about your financial health.
Frequently asked questions
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