Medical Debt Shows Up Less Often on Credit Reports

The share of Americans with unpaid medical bills tainting their credit files has fallen in the two years since the major credit reporting agencies — Equifax, Experian and TransUnion — changed how that debt was reported, a federal watchdog agency said this week.

But even with the changes, some 15 million people — many of them living in low-income communities and in the South — still have medical bills in their credit files, the Consumer Financial Protection Bureau reported. Rohit Chopra, the bureau’s director, said in a statement that “further reforms” were needed to scour medical debt from credit histories. The bureau is considering a rule to ban medical debt from consumer credit files.

The bureau estimated in a 2022 report that well over half the debt that appeared on credit reports as being in collection was medical debt. Having unpaid medical bills on your credit report can make it hard to qualify for loans and credit cards, get cellphone service, rent an apartment or even secure a job, since landlords and employers also check applicants’ credit history.

Yet the bureau’s research suggests that medical debt is a less useful measure of a borrower’s creditworthiness than other types of debt, largely because of the complexities of the American health care system. People can incur medical bills unexpectedly, and many think that their health insurance will cover the costs. They often must contact insurers, hospitals or doctors and may end up haggling over their correct share of the bill. And the consumer bureau previously found that medical collection debt reported to the credit bureaus was “plagued by inaccuracies.”

“There’s a lot of back and forth,” said Breno Braga, a principal research associate at the Urban Institute think tank and a co-author of a recent report on medical debt. “You don’t see that with any other type of debt.”

In 2022, amid scrutiny from the consumer bureau, the three major credit reporting agencies voluntarily adopted changes in how medical bills were included in credit files. They agreed to exclude any medical collection debts that had been paid and those that were less than a year old, allowing for time to clarify a patient’s responsibility for the bill. And as of April 2023, the credit bureaus stopped including any medical collections for amounts under $500. (Hospitals and doctors send unpaid bills to collection agencies, which may then report them to the credit bureaus.)