Urban Wire Medical Debt Was Erased from Credit Records for Most Consumers, Potentially Improving Many Americans' Lives
Fredric Blavin, Breno Braga, Michael Karpman
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The major credit bureaus recently enacted significant changes in reporting medical debt in collections. In July 2022, the credit bureaus removed paid medical collections from credit reports and stopped reporting unpaid medical collections until those debts were one year old, as opposed to the previous six-month grace period. In August 2022, it was announced that medical debt in collections would no longer be used in calculating Vantage scores, one of the country’s most used credit scoring models. In addition, after April 2023, medical collections under $500 would no longer appear on consumer credit reports.

These changes could affect the many aspects of people’s lives that are tied to their credit histories. Medical debt has constituted most of the debt (PDF) in collections on consumer credit reports for the past decade, lowering consumers’ credit scores and thus limiting their access to loans and other credit. Even though medical debt is a poor predictor of a person’s credit risk (PDF)—in many cases, it simply reflects problems navigating complex health care billing and insurance reimbursement processes—having these debts in collections may also affect a person’s ability to obtain insurance, find a job, or rent a home.

Analyzing the Urban Institute’s credit bureau data, we find these reporting changes have already erased medical debt in collections from most consumers’ credit reports. Even before the changes, the share of consumers with medical debt in collections had declined, from 16.0 percent in August 2018 to 12.6 percent in February 2022. By August 2022—one month after the credit bureau's first change—11.6 percent of consumers had medical debt in collections on their credit files. The decline accelerated significantly in recent months, with only 5.0 percent of adults having medical debt in collections on their credit reports in August 2023. We estimate more than 15 million consumers might have had all their medical debt in collections erased from their credit files in the past year.


The credit bureaus’ recent actions may have also affected many consumers’ credit scores. Since the changes went into effect, consumers who had medical debt collections in August 2022—about 27 million adults—experienced a significant improvement in their Vantage scores. From August 2022 to August 2023, their average score increased from 585 to 615 points, moving these consumers from a subprime level (below 600) to near prime level (between 601 and 660). In contrast, consumers without medical debt in the records in August 2022 experienced almost no change in their credit scores by August 2023 (from 712 to 711).


These results provide insight into the potential of further restrictions on medical debt reporting, including the Consumer Financial Protection Bureau’s recent announcement of a proposed rulemaking process to remove all remaining medical debt from credit reports. The announcement follows legislation that’s already passed in two states to remove all medical debt from credit reports: a Colorado law that went into effect in August 2023 and New York legislation, which passed the state legislature in June 2023 and is currently being reviewed by the governor.

Under these policies, the share of adults with medical debt on their credit records will continue to fall, and their credit scores based on other scoring models will likely continue to rise. However, these reporting changes don’t affect the underlying debt consumers owe to health care providers. With some exceptions, hospitals, other providers, and collection agencies can still sue patients to collect on unpaid medical bills. Reducing the burden of medical debt and its wide-ranging consequences would likely require health insurance reforms that build on the Affordable Care Act to further protect consumers from out-of-pocket medical expenses they can’t afford.

It will also be important to monitor provider billing and collection practices in response to concerns that removing medical debt from credit reports could have unintended consequences, such as increased efforts among providers to obtain upfront payment before delivering care or reliance on other collection strategies. Because the credit reporting changes occurred recently, there’s not yet an evidence base to assess these concerns, underscoring the need for further research. Household surveys, court records, and information collected from providers will be increasingly important sources of data for examining these questions, as well as tracking the prevalence of medical debt as less of this debt appears on credit reports.

Research Areas Wealth and financial well-being
Tags Asset and debts Family credit and debt Financial stability Health care spending and costs
Policy Centers Housing Finance Policy Center Center on Labor, Human Services, and Population
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