NY State Attorney General, Eric Schneiderman’s urgings have caused the nation’s 3 major credit reporting agencies to announce changes in the ways that they score medical debt on credit reports. Equifax, Experian and Transunion have agreed to no longer treat medical debt as just another negative mark on people’s credit scores. They will also refrain from adding delinquent medical bills to the report until they have been outstanding beyond 180 days.
Last August, Fair Isaac, the company that generates the FICO score, announced the FICO® Score 9, which is a newer way to review consumer collection information. They described it as offering “sophisticated treatment of differentiating medical from non-medical collection agency accounts.” As result, medical collections will now have a lesser impact on the score, based on the credit risk. The company also said that for consumers with medical bills as their only negative mark, the median FICO score will go up 25 points. Since the FICO score is accessed by all three credit reporting agencies, this is a significant move up for consumers with medical collections.
However, there is some fine print associated with these hopeful changes. They aren’t expected to go into effect for months and once they do, the consumer’s score will only rise the 25 points if the only serious late payment is for medical debt. Additionally, consumer scores won’t be reduced by FICO for late bill payments, even if those bills have been paid off.
Another concern is that the changes will only address newly reported debt, not existing medical debt. Also, consumers using credit cards to pay off medical debt would lose the FICO protection if they were then unable to pay off the credit cards. Many wonder why the credit agencies don’t abolish the debt altogether.
According to a December report released by the Consumer Financial Protection Bureau (CFPB), more than 43 million Americans have medical debt on their credit reports. Of these individuals, many will be forced to declare bankruptcy. According to data gathered from the U.S. Census and the Centers for Disease Control, 60% of all bankruptcies can be mainly attributed to medical debt. With these harrowing figures, consumers wait for positive news and more positive changes to finally take place.
If you are in a financial crisis and are considering filing bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.