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The three credit reporting agencies have recently changed how medical debt can affect credit reports. Equifax, TransUnion and Experian have lessened the negative impact late medical bills can have on credit scores.
The United States uses the FICO credit scoring system, which ranks credit ratings between 300 and 850. Medical debt has damaged the credit scores of many Americans, making it difficult to secure employment, housing and lines of credit.
How Will FICO 9 Help People With Unpaid Medical Bills?
According to Fair Isaac Corporation (FICO), the company responsible for credit score metrics, there will be several changes to how medical debt will affect consumers.
- FICO 9, the new scoring system, will no longer lower credit scores for late medical bill payments if the bills have been paid off.
- Under the FICO 9 system, there will be a distinction between medical bills and other forms of consumer debt. Unpaid medical bills will not lower credit scores as severely as unpaid credit cards or mortgages.
Presumably, the positive impact FICO 9 will have on Americans could become significant. Over 64 million Americans have medical bills in collections listed on their credit reports. Individuals with medical debt on their credit reports could see credit scores rise by 25 points.
Unfortunately, some individuals with medical debt will owe tens of thousands to hospitals, doctors and emergency services. In some cases, it might be a wiser decision to consult with a bankruptcy attorney to discuss other available options for discharging medical debt from a credit report.
Medical debt is unsecured debt, meaning it is not backed by any kind of collateral and can be discharged by filing for Chapter 7 bankruptcy.
The Sader Law Firm – Kansas City Bankruptcy Attorneys
