Federal rule would ban medical debt from credit reports

An open laptop showing a credit score page, surrounded by medical bills, hundred dollar bills and a stethoscope

AARP (Source: Shutterstock; Getty Images)

When you get sick, the last thing you need to worry about is your credit score. But federal regulations generally allow creditors to access information about your medical debt when deciding whether to give you a loan.

A rule proposed by the Consumer Financial Protection Bureau would change that by removing medical bills from most credit reports.

AARP submitted comments in support of the rule change last week.

Studies show medical debt is not a good predictor of someone’s creditworthiness. But if it shows up in a credit report, it can keep people from renting or buying a home or getting a loan or a job, as we noted in our letter to CFPB Director Rohit Chopra.

Unlike other types of borrowing, medical debt is often the result of an unexpected illness or accident. It can be exacerbated by billing errors and the complexities of insurance coverage and reimbursement, our letter said.

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The change also aims to prevent bad actors from using the credit reporting system to coerce people into paying debts they don’t owe, CFPB’s Chopra said when announcing the proposal in June.

Millions of Americans are impacted

In 2022, the nation’s three largest credit reporting agencies — Equifax, Experian and TransUnion — voluntarily began removing paid medical debts from credit reports, and last year stopped including outstanding balances of less than $500. FICO and VantageScore, the two major credit scoring companies, have also given less weight to medical bills, according to the CFPB.

Even so, according to the bureau, 15 million Americans have a collective $49 billion in medical debt appearing in the credit reporting system.

The bureau estimates that affected Americans will see credit scores rise by 20 points, on average, if the change is finalized.

Older adults on Medicare are not immune from unpaid medical bills, since coverage gaps can lead to surprise out-of-pocket costs, wrote David Certner, AARP legislative counsel and legislative policy director. A 2022 KFF survey found 22 percent of Americans 65 and older had medical debt.

Join Our Fight for Financial Security

In addition to the exclusion of medical debt from credit reports, AARP called for “a robust appeal process” for consumers whose medical debt information is shared with creditors.

“We appreciate the CFPB’s commitment to ensuring that older Americans can focus on recovering from illness and injury rather than worrying ... that a delinquent medical debt will negatively impact their credit score and impact their financial security,” Certner wrote.

Read our comments, and learn more about how AARP is fighting to protect the financial security of people 50 and older.

Consumers can submit credit reporting complaints by visiting the CFPB’s website or calling 855-411-CFPB.

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Natalie Missakian covers federal and state policy and writes AARP’s Fighting for You Every Day blog. She previously worked as a reporter for the New Haven Register and daily newspapers in Ohio. She has also written for the AARP Bulletin, the Hartford Business Journal and other publications.