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FICO to give less weight to delinquent medical bills

One of the issues we have written about on this blog is medical debt and the way the medical industry handles late payments. In fact, the medical industry is well-known for its lack of patience with patients who don’t pay, and sends late bills off to collections quicker than perhaps any other industry. This can cause problems, of course, for patients who did not pay because the bill was in dispute or because they are working out payments from their insurance company. Unfortunately, up until now, credit scoring has not taken these factors into account.

FICO, one of the major companies which calculate consumer credit scores in the United States, announced earlier this month that it will no longer be counting overdue medical payments which have already been settled when figuring credit risk. In addition, overdue medical payments which are going to be paid will be discounting in credit scoring. This will surely provide a boost for debtors who mostly have unpaid medical bills. 

The change, say experts, will allow for a better reflection of credit risk for consumers who end up paying or resolving their bills. That being said, lenders will still be able to see when consumers have had unpaid medical bills and make their decision based on that, despite the FICO credit score giving such things less weight.

Credit, of course, is a big issue when it comes to bankruptcy. Before filing for bankruptcy, it is critical for debtors to understand the credit consequences of doing so and weigh whether a filing will really leave them in a better financial position than they are currently in. For some folks, the answer will be unequivocally affirmative, while for others there may be better alternatives. In making this decision, it can help to consult with an attorney who understands the bankruptcy process and can help evaluate your case to see whether you are a good candidate for bankruptcy.

Source: Insurance Journal, “FICO to Downplay Medical Debt in Credit Scores,” Amrutha Gayathri & Emily Stephenson, August 14, 2014. 

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