Medical Debt & Credit Reporting Protections

What Is It?

Medical debt has long been the leading cause of bankruptcy and credit damage in the United States. However, a series of recent federal rules have dramatically reduced its power to harm your credit and your ability to negotiate it down:

• The three major credit bureaus (Equifax, Experian, TransUnion) voluntarily stopped reporting medical debt under $500 in 2023, and agreed to remove all paid medical debt and debt less than one year old from credit reports.
• The CFPB issued a final rule in January 2025 that would ban medical debt from credit reports entirely. (This rule has faced legal challenges — check current status.)
• The No Surprises Act (2022) prohibits out-of-network surprise billing for emergency care and certain non-emergency situations at in-network facilities.
• The FCRA gives you the right to dispute inaccurate medical collections and have them investigated within 30 days.

How It Works

Step 1 — Request an itemized bill. You are entitled to an itemized statement of every charge. Review for duplicate charges, services not received, and upcoding (billing for a more expensive service than provided).

Step 2 — Check if the debt is reportable. Under current bureau policies, medical debt under $500 cannot appear on your credit report. Debts paid in full, or less than 12 months old, must be removed. Dispute any that appear in violation of this.

Step 3 — Dispute inaccurate entries. File disputes directly with all three bureaus online, by mail, or by phone. Include documentation. The bureau must investigate within 30 days and remove unverifiable items.

Step 4 — Invoke No Surprises Act protections. If you received an out-of-network bill for emergency care (or certain scheduled care at an in-network facility), you may only be charged your in-network cost-sharing amount. File a complaint at cms.gov/nosurprises if billed more.

Step 5 — Negotiate before paying. Hospitals are required by law (ACA § 501(r)) to offer financial assistance programs if they are nonprofit. Offer a lump-sum settlement — collectors routinely accept 20–40 cents on the dollar for old medical debt.

What Most People Don’t Know

• Paying a medical debt does not restore its damage to your credit score under the old system — but under the new rules, paid medical debt must be removed from reports entirely, so paying now can clean your report.
• Medical debt collectors cannot garnish wages or seize bank accounts in many states without first suing you and obtaining a judgment — a process that takes months and often isn’t worth it for small debts.
• The statute of limitations on medical debt varies by state (typically 3–6 years) — after which collectors can no longer sue to collect, though they may still try to contact you.
• Nonprofit hospitals receiving federal funds must have financial assistance (charity care) programs and cannot use aggressive collection tactics before determining eligibility.
• Balance billing for air ambulances is also restricted under federal law — a separate but related protection many patients don’t know to invoke.

Who Benefits Most?

Anyone who has received an unexpected hospital bill, emergency room charge, or surprise out-of-network bill. Also anyone with old medical debt affecting their credit score.

Legal Basis

• No Surprises Act — Consolidated Appropriations Act, 2021, Title I (42 U.S.C. § 300gg-111 et seq.)
• Fair Credit Reporting Act (FCRA) — 15 U.S.C. § 1681 et seq. (dispute rights, reporting accuracy requirements)
• ACA § 501(r) — 26 U.S.C. § 501(r) (nonprofit hospital financial assistance requirements)
• CFPB Medical Debt Credit Reporting Rule (2025) — amending 12 CFR Part 1022 (Regulation V)

Frequently Asked Questions

Sources

• No Surprises Act — CMS
• CFPB — Medical Debt Credit Reporting
• FTC — Disputing Errors on Credit Reports
• CFPB — Medical Debt Rule (2025)