A hospital bill you paid off last year may no longer appear on your credit report, which can improve your mortgage approval odds. In 2023, the three major credit bureaus stopped reporting paid medical collections and eliminated all medical collections under $500, regardless of payment status. That doesn't mean medical debt is irrelevant to underwriting—it just shifted how and when it matters.
What the 2023 changes actually did
Starting in mid-2023, Equifax, Experian, and TransUnion agreed to remove three categories of medical-collection tradelines: any paid medical collection, any medical collection under $500 (paid or unpaid), and any unpaid medical collection less than one year old. If you settled a $300 emergency-room bill two years ago, it's gone from your report. If you're still disputing a $450 radiology charge from six months ago, it won't appear. But a $600 unpaid collection from eighteen months ago still shows up and still affects your credit score and debt-to-income ratio.
How unpaid medical debt affects mortgage underwriting
Mortgage underwriters look at two things: your credit score and your debt obligations. An unpaid medical collection over $500 pulls your score down—sometimes by 20 to 60 points depending on the rest of your profile—and some automated underwriting systems count the balance as a monthly obligation even if no payment plan exists. A $2,000 unpaid medical collection might be treated as a $100 monthly debt under certain investor guidelines, which tightens your qualifying ratios. Conventional, FHA, VA, and USDA programs all handle medical collections slightly differently in their overlays, but none ignore them entirely when they're still reporting.
What to do before you apply
Pull your own credit report at least 60 days before you plan to submit a mortgage application. Look for any medical tradelines over $500 or any unpaid collection older than twelve months. If the debt is legitimate and you can afford to pay it, settle it in full and get written confirmation that the account will be reported as paid. Once paid and under $500 (or paid regardless of amount), it should drop off within 30 to 45 days. If the collection is incorrect—wrong amount, not yours, already paid—file a dispute with the bureau and the collection agency simultaneously. Document everything. If you're close to approval but a single medical account is holding you back, your loan officer can sometimes work with underwriting to manually remove the tradeline from qualifying ratios if you provide proof of payment or a payment plan, but that's situational and not guaranteed.
The Alliance take
The 2023 rules helped millions of borrowers by clearing smaller and paid medical debts, but they didn't make medical collections invisible. If you're carrying unpaid balances above the threshold, address them early—waiting until you're in contract adds unnecessary risk. Pull your credit, resolve what you can, and talk through the rest with your loan officer during pre-approval. Start an application when you're ready, and bring documentation for anything medical-related that might still be reporting.
Rates illustrative and subject to change; may not be available at commitment or closing; not a commitment to lend.