Home > News > 43 Million Americans Have Unpaid Medical Debt on Their Credit Reports

Comments 1 Comment

Americans’ credit reports contain unpaid medical debts far more than any other kind of unpaid bills, the Consumer Financial Protection Bureau has found in a study. A “staggering” 52% of all unpaid debt entries listed on credit reports is from medical expenses, the bureau says. And some 43 million Americans — or about one in five adults — have an unpaid medical debt on their records, dragging down their credit scores.

Many of those derogatory entries on credit reports are the result of America’s confusing medical billing and insurance payment system, the CFPB says. Some 15 million Americans have only unpaid medical debt on the derogatory side of their credit reports, suggesting those consumers don’t have trouble paying other bills. Also, most unpaid medical bills are small — the median amount is $200, far lower than the median unpaid bill for credit cards or auto loans.


Source: Consumer Financial Protection Bureau

“Today’s study found that many consumers are affected by medical debt, that medical debt dominates collections trade lines in the credit reporting system, and that the appearance of medical debt information on credit reports can reflect the complexity, confusion, and delays that characterize medical billing and insurance reimbursement rather than the consumer’s ability or willingness to pay their debts,” said CFPB director Richard Cordray in a statement about the research. “If a credit score is supposed to be a predictor of a consumer’s likelihood of paying back a debt, these findings raise serious questions about how medical debt collections items affect a consumer’s credit score.”

The report highlights efforts already under way in the credit reporting system intended to reduce the impact that unpaid medical bills can have on a consumer’s credit score. Earlier this year, the CFPB released a report showing that consumers with unpaid-medical-debt-only credit reports paid their bills at the rate of other consumers with higher credit scores, suggesting current scoring formulas inaccurately reflected those consumers’ credit-worthiness.

In August, Fair Isaac, keepers of the FICO credit scoring formula, said it was changing its formula, and the penalty for unpaid medical debt would be reduced. It will take time for lenders to adopt the new formula, however.

This study further found that unpaid-medical-debt-only consumers owe less, have more available credit which they could use to repay their debt, and are more reliable payers than consumers with non-medical collections tradelines. The problem, the report suggests, is that many consumers don’t know who to pay, or what they owe, after medical procedures.

“Lack of price transparency and the complex system of insurance coverage and cost sharing means many consumers, including those who have health coverage, receive medical bills that are a source of confusion,” it says.

The report also highlights the hundreds of firms that might ultimately report a patient as late on a medical bill. Their “indirect affiliation with the debt introduces potential sources of error in collections reporting,” the CFPB said.

Medical debts also draw a larger percentage of disputes than other kinds of debt, the CFPB said.

As part of a larger initiative, the CFPB announced Thursday that it was now requiring large credit reporting agencies to provide regular reports about the accuracy of their data, including new details on creditors who attract the most disputes.

“These reports will specify the number of times consumers dispute information on their credit reports during that period,” the CFPB said. “It will also list furnishers with the most disputes, industries with the most disputes, and furnishers with particularly high dispute rates relative to their peers. We will also see how those disputes get resolved.”

More on Managing Debt:

Image: Christian Delbert

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team