For many Americans, a trip to the doctor—or worse, an unplanned stint in the hospital—has meant more than a scare about their health. For some, it’s the start of a financial downward spiral. Medical bills, sometimes inflated through errors or overcharging, have a knack for sticking with credit reports for decades, weighing down scores and preventing access to buying a house, finding a job, or renting an apartment. Now, one move the Consumer Financial Protection Bureau (CFPB) made recently may alter that reality, bringing relief to those overwhelmed by medical bills.
In January 2025, the CFPB approved a rule that’s nothing short of revolutionary. It erases approximately $49 billion of unpaid medical debt from the credit reports of nearly 15 million Americans. For them, it may mean a 20-point average credit score increase—enough to make mortgages, car loans, or small-business financing possible that had previously been out of reach. This is more than a technical policy adjustment; for many, it’s a lifeline.
Unlike most debt, medical debt does not result from choice. Disease and accident hit unexpectedly, and the complicated universe of medical billing usually results in errors. The CFPB’s study discovered that medical debt reveals to lenders nearly nothing about a borrower’s propensity to repay other kinds of loans. Yet such debts have been the tipping point in thousands of mortgage denials for otherwise qualified purchasers. This new rule addresses this disparity by prohibiting the reporting of medical bills to credit bureaus and prohibiting lenders from considering medical debt in their lending decisions.
The shift would be particularly impactful to communities that have historically borne a greater weight of medical debt—veterans, the disabled, and those living in the South. To them, this policy isn’t merely about figures; it’s about equity and the opportunity to break free from past bills.
Yet it has been a bumpy ride to get here. Debt collection industry associations and some members of Congress have resisted aggressively, stating that excising medical debt from credit reports decreases their accuracy and may expose lenders to more risk. Dan Smith, president of the Consumer Data Industry Association, maintains lenders require a “complete financial picture” to gauge risk. Legal challenges have already held up the rule’s implementation, with Texas courts considering whether the CFPB overstepped its bounds. In a surprise, the agency’s new management has even added to the demands to put the rule on hold or scrap it altogether, leaving millions hanging.
Despite this, allies are holding firm. Consumer activists, legal aid organizations, and ordinary individuals slammed by medical debt are fighting the rule in court. Among them is David Deeds, a Texan truck driver who survived cancer but had his credit ruined by the subsequent bills. After fighting his way back from homelessness, medical debt knocked him down again. For Deeds, wiping that debt off his credit report isn’t about a score—it’s about dignity and a second chance.
At the same time, a number of states have acted independently. States such as California, New York, and Colorado prohibit nearly all medical debt from being reported to credit reports, and around a dozen states have those same kinds of protections. But as the National Consumer Law Center’s Jennifer Wagner points out, federal action means that relief isn’t limited to residents of liberal states—it reaches from rural Alabama to small cities in West Virginia.
The battle for medical debt’s place in credit reporting is not yet won. Congressional legislation seeks to reverse the CFPB’s action, and court battles persist. But the tide is moving toward a credit system that does not punish individuals for falling ill. As Consumer Action’s Ruth Susswein says, previous medical debt reveals nothing about an individual’s willingness or capacity to pay subsequent bills—and shouldn’t be used to determine access to housing, credit, or employment.
Until now, the CFPB’s rule is a bold move to untangle health emergencies from financial devastation, providing millions with a fairer chance to rebuild, not only their finances, but also their lives.