If you live in one of these states, the new change could lower your credit score

In a new move, the Trump administration is trying to include medical debt on credit reports, even though 15 states have banned credit bureaus from doing so. In fact, Delaware’s law went into effect just this week.

According to an interpretive rule issued by the Consumer Financial Protection Bureau (CFPB), a federal law known as the Fair Credit Reporting Act (FCRA) can override state laws that prevent medical debt from appearing on credit reports.

As of 2024, more than one in three (36%) U.S. households have medical debt. About one in five (21%) had an overdue medical bill, and a similar number (23%) had a medical bill paid over time to the provider.

“In general, we should always be trying to find a way to make the economy fairer. This doesn’t do that,” said Adam Rust, director of financial services at the Consumer Federation of America. “People shouldn’t be like that [denied] A job, safe housing, or a loan just because they got sick.”

In the new interpretive rule, the CFPB claims that the FCRA preempts these state laws. However, because it is an interpretive rule, it is not considered legally binding, according to Kay Pestina, director and vice president of the Patient and Consumer Protection Program at KFF, a health policy nonprofit.

The rule “will not have an immediate impact on consumers, because state laws are still in effect,” Pestina said. “State laws preventing medical debt from being included on credit reports will likely be challenged in lawsuits, ultimately leaving it up to the courts to decide whether these state laws can still be enforced.”

While three of the major credit reporting agencies — Equifax, Experian, and Transunion — will stop including medical group debt balances of less than $500 on credit reports in 2023, there are no federal laws prohibiting medical debt from appearing on credit reports, Pestina points out.

Those who support including medical debt on credit reports believe it can be helpful in determining whether potential borrowers are likely to repay debts.

The change also comes amid a government shutdown over the status of Affordable Care Act benefits, which are set to expire at the end of this year. If the subsidy period is allowed to expire, millions of people could see their health insurance premiums rise, and some may abandon insurance as a result.

“As health insurance costs rise and health care prices continue to rise, a major illness can have greater impacts on someone’s financial health,” Pestina said.

Earlier this year, the Biden administration passed a federal rule that would remove medical debt from credit reports, but that rule was struck down by a federal judge in Texas just months later.