After a few years of relief and proposed reforms; unfortunately, medical debt is once again able to appear on credit reports — meaning unpaid hospital bills and collections can damage your credit.
What Happened: A Rule That Was Overturned
- In January 2025, Consumer Financial Protection Bureau (CFPB) finalized a rule that would have removed medical bills from credit reports and barred lenders from using medical-debt information when making lending decisions — a change expected to help about 15 million Americans. The CFPB estimated that this rule could lift about $49 billion in medical debt off credit reports, potentially raising credit scores by an average of 20 points.
- But on July 11, 2025, as a result of legal arguments, industry pushback, and a shifting political environment; a federal court in Texas vacated (overturned) the rule — saying the CFPB had exceeded its authority under the Fair Credit Reporting Act (FCRA). That effectively restores the prior status quo: medical debts may be reported to credit-reporting companies.
- The Trump administration has historically been critical of CFPB regulation and more aligned with business and lender interests. Major credit-industry groups — including lenders, banks, and credit-reporting agencies — opposed the rule. So as of now & throughout the current administration the rule is dead — there will be no automatic sweeping removal of medical collections from credit reports.
Key Stats on Medical Debt in America (2024–2025)
- According to Kaiser Family Foundation (KFF), Americans owe at least ≈ $220 billion in outstanding medical debt.
- About 14 million U.S. adults owe more than $1,000 in medical debt.
- Approximately 3 million adults owe more than $10,000 in medical debt.
- On a broader scale — using a wider definition that includes debts owed via credit cards, loans, or owed to friends/family — some analyses find that as many as 41% of adults report some form of health-care–related debt.
What That Means for Your Credit
With the rule nullified, medical debt — especially unpaid or collection-sent medical bills — can once more show up on your credit report. That opens the door for several potential negative financial impacts:
- Credit-score damage: Medical collections can be treated like other delinquent debts — potentially dragging down your credit score, making it harder to qualify for loans or secure favorable interest rates.
- Loan, mortgage, and credit-card difficulties: Lenders, landlords, and even some employers may view collections on your credit report unfavorably. A medical debt listing might make it harder to get a mortgage, auto loan, or credit card.
- Long-term reporting: Unless removed, medical collections could remain on your report for years (depending on the reporting agencies and the laws in your state).
- Surprise financial setbacks: Medical debt often arises from emergencies or unforeseen health issues — meaning people who thought they were protected might now find themselves facing unexpected credit damage.
How VitalLink Can Help Employees Facing Medical Debt
With medical debt once again able to appear on credit reports — and potentially damage credit scores — having a program like VitalLink can make a real difference for employees and their families. Here’s how VitalLink can tie into this challenge:
VitalLink’s Role: More Than a Perk — A Safety Net
- VitalLink isn’t just a wellness or fringe program — it offers direct support for financial well-being, including help with medical expenses and debt. Part of VitalLink’s mission is to connect individuals with experts “who can assist you in reducing the stress and anxiety of bill paying, creditors, and unexpected financial events in your life.” VitalLink+1
- That support includes help negotiating medical bills, exploring hospital financial assistance, and potentially lowering or eliminating past medical debt. VitalLink+1
- For an employee struggling with unpaid medical bills — perhaps already wound up in collections — VitalLink can be a lifeline: helping navigate paperwork, advocate with providers, and find programs for financial relief. This not only reduces immediate financial burden but also helps prevent long-term damage to credit.
Why This Matters Now
Given the reinstatement of medical-debt reporting (post-July 2025 rule reversal), unpaid medical bills can once again hurt credit scores, make obtaining loans harder, or even impact other financial opportunities. A program like VitalLink can help employees avoid or undo those harmful effects — preserving their credit and financial stability.
For employers, offering VitalLink signals a commitment to holistic employee wellness (not just health insurance or wellness perks). It can help reduce stress-related absenteeism, support employee retention, and improve overall workplace productivity. Connect with us for a 30 minute virtual meeting to learn more about all the ways VitalLink can help you Improve Retention, Reduce Turnover and Help Your Workforce find debt relief & wellness.
🔗 Key Sources for Reference (and Backlinks)
- Federal court vacates medical-debt rule — medical bills can again be reported. Inquirer.com+2ABA Banking Journal+2
- CFPB’s 2025 rule to remove medical debt (before being overturned). Consumer Financial Protection Bureau+2American Hospital Association+2
- Analysis of current law and what the FCRA allows. Congress.gov+2NCLC+2