A medical bill in collection on your personal credit report can still affect business loan approval, because many small business lenders check the owner's personal credit score and report before they decide. How much it matters depends on the kind of medical collection, whether it should be on your report at all and how a given lender reads what remains.
Which medical collections can still appear on your personal credit report
According to a CFPB research report published April 26, 2023, Equifax, Experian and TransUnion made two changes in July 2022: paid medical collections came off credit reports, and the delay before an unpaid medical collection is reported grew from six months after the first delinquency to one year. Then, on April 11, 2023, the bureaus announced they had removed unpaid medical collections under $500, which the CFPB's January 2025 rule describes as collections "with initial balances below $500" (Federal Register, January 14, 2025).
That leaves one main group that can still be reported: unpaid medical collections with an initial balance of $500 or more that are at least a year past their first delinquency. In a May 8, 2023 post, the CFPB pointed out that credit card debt isn't covered, even when the card paid a medical bill under $500.
The CFPB estimated that 22.8 million people would have at least one medical collection removed once the under-$500 change was complete, 73 percent of people who had medical collections on their credit reports in December 2022. It also estimated that 50 percent of people with medical collections would still have at least one afterward.
What happened to the CFPB's 2025 medical debt rule
The CFPB announced a final rule on January 7, 2025, published in the Federal Register a week later. Its summary says the Fair Credit Reporting Act "prohibits creditors from considering medical information in credit eligibility determinations," and that the CFPB was "removing a regulatory exception that had permitted creditors to obtain and use information on medical debts." It also provided that a credit bureau generally may not furnish a creditor a report containing medical debt information the creditor is barred from using.
On July 11, 2025, the U.S. District Court for the Eastern District of Texas vacated the rule, as the CFPB's archived announcement now notes, so its ban on reporting and using medical debt is not in force. That leaves the bureaus' 2022 and 2023 changes, plus any state law that applies, as the main limits on medical debt reporting, and a collection outside them can still show up when a lender pulls your credit.
State medical debt laws and the preemption question
According to the CFPB's January 2025 rule, Colorado and New York each passed laws in 2023 prohibiting medical debts from appearing on consumer reports, and California, Connecticut, Minnesota, New Jersey, Illinois and Virginia followed in 2024. Maine passed a law in 2019 requiring credit bureaus to remove medical debt once they receive reasonable evidence that it has been settled or paid.
On October 28, 2025, the CFPB published an interpretive rule on FCRA preemption saying the FCRA "generally preempts State laws that touch on broad areas of credit reporting." It replaces a July 2022 interpretive rule that had named medical debt as an area states could regulate, and says that earlier rule was wrong to conclude states can validly regulate whether categories of information such as medical debt appear on a consumer report. The same document says it "does not have the force or effect of law" and that courts are "the ultimate arbiters of statutory meaning." Courts are now ruling on individual state laws, and if you live in one of these states, you can still dispute a medical collection that shows up.
How medical bill collections on your personal credit affect business loan approval
When an owner signs a personal guarantee or applies as a sole proprietor, many lenders that offer term loans and lines of credit pull the owner's personal credit. What they do with a medical collection comes down to each lender's policy. Common approaches include:
- Reading only the score, so the collection counts only through its effect on that number
- Reading the report line by line and asking for a short letter of explanation
- Asking for proof that the collection is paid, or on a payment plan, before closing
- Weighing a medical collection differently from late payments on cards or other loans
Score versions differ too. The CFPB's January 2025 rule reports that newer FICO and VantageScore models separate medical from nonmedical collections, give less weight to unpaid medical collections and ignore paid ones, and that in January 2023 VantageScore changed models 3.0 and 4.0 to ignore all medical collections. Lenders choose their model, so the same collection can weigh differently from lender to lender. For more, see what credit score you need for a business loan and personal vs. business credit.
Under SBA's SOP 50 10 8.1, effective October 1, 2026, the lender's credit memorandum for a Standard 7(a) loan must document this step: "Review and analyze the Applicant(s)' owner(s), and Guarantor(s) personal credit reports and discuss any credit issues." The same line appears for 7(a) Small loans, where a scoring model that combines the business and its guarantors is allowed only if, among other conditions, "the model does not rely solely on consumer credit scores." On an SBA loan, a remaining medical collection can come up as a credit issue in the credit memo, next to cash flow and repayment ability.
An example credit file, item by item
All figures here are assumptions. The sole owner of a landscaping company applies in November 2026 for a $60,000 business line of credit and will sign a personal guarantee. The owner has $22,000 in personal savings, and five medical-related items are on, or could reach, the owner's personal credit reports:
| Item | Assumed facts | Status under the bureaus' changes | Step to take |
|---|---|---|---|
| A | $180 emergency room bill, unpaid, sent to collection in 2022 | Initial balance under $500, so it should no longer appear | Dispute it if it's still listed |
| B | $1,250 imaging bill, paid to the collector in March 2025 | Paid, so it should no longer appear | Keep the paid letter and dispute if it's listed |
| C | $3,600 surgery balance, unpaid, first delinquent September 2025 | $500 or more and over a year past first delinquency, so it can appear | Pay it, set up a plan or dispute an error |
| D | $900 physical therapy bill, unpaid, first delinquent June 2026 | Under a year past first delinquency, so not yet reportable | Pay it before June 2027 |
| E | $620 urgent care visit charged to a personal credit card, card now 60 days late | Credit card debt, which the medical changes don't cover | Bring the card current |
Item C is the medical collection a lender is likely to see, and the owner has three choices for it:
| Option for item C | Cash out of savings | Savings left | Effect on the report |
|---|---|---|---|
| Pay $3,600 in full now | $3,600 | $18,400 | A paid medical collection should no longer appear under the bureaus' changes |
| 12 monthly payments of $300 from savings | $300 a month | $22,000 at the start, $18,400 after 12 months | The collection stays unpaid until the last payment |
| Dispute an error | $0 | $22,000 | Depends on the outcome of the dispute |
Paying item C in full uses 16.4% of savings ($3,600 divided by $22,000). Clearing item D at the same time brings the total to $4,500, which is 20.5% of savings and leaves $17,500. A payment plan keeps more cash on hand but leaves the collection open during underwriting. Either way, keep the collector's paid-in-full letter or payment plan agreement for the loan file.
We can't tell you whether your score will change or by how much. Using a sample of medical collections removed from 2012 to 2020, a CFPB model estimated an average 25-point increase in the first quarter after a person's last medical collection was removed (21 points where the collections were under $500, 32 where they were over). That's a research average, and one person's score can move more, less or not at all. If a lender asks about item C, keep the letter of explanation to dates, the amount, insurance status and what you've done about it. There's usually no need to describe the treatment or the condition.
If a lender declines your business loan application
Regulation B gives business applicants a right to know why. Under 12 CFR 1002.9, if your business had gross revenues of $1 million or less in its preceding fiscal year, the lender must notify you of the action taken within 30 days after receiving a completed application. For an adverse action, it must give the specific reasons or a disclosure of your right to them, which can come at the time of application, and reasons you request within 60 days of the notice are due within 30 days. Above $1 million, and for trade credit, factoring and similar business credit, notice comes "within a reasonable time," with written reasons if you ask in writing within 60 days. The regulation also says a statement that you failed to achieve a qualifying score on the creditor's scoring system is insufficient.
If the reasons point to a collection, you know what to work on before you apply again. Through EQ Funding, one application reaches lenders that compete to fund your business, and each reviews personal credit under its own policy. Lenders decide after reviewing the full application, and approval and terms vary by lender.