If unresolved medical bills are keeping your credit score low, there’s good news. Changes are coming this fall to Fair Isaac’s FICO Score, which will take a closer look at unpaid medical bills and accounts sent to collections. Consumers whose only negative mark is from medical debt can expect their credit score to increase by 25 points.
These new rules are far reaching, as more than half of all debt on credit reports is from medical bills, according to the Consumer Financial Protection Bureau (CFPB). The changes also expand banks’ abilities to offer loans to borrowers who may not have otherwise qualified.
In July, approximately 64.3 million U.S. consumers had medical debt on their credit reports, according to the credit bureau Experian. Of 106.5 million total consumers with agency collections on their reports, 9.4 million had a zero balance. Under the new credit score system (FICO Score 9), those consumers will not be penalized.
The changes come as a result of an agreement between the three major credit bureaus using FICO scores- Experian, Equifax and TransUnion. In addition, delinquent medical bills will not be reported to credit bureaus for six months. This is another win for consumers, allowing them time to pay claims and resolve disputes with their insurance company.
While these changes make it easier to qualify for a loan, it is important consumers keep their debt-to-income ratio under 43 percent. This is the highest ratio a borrower can have and still qualify for a mortgage in today’s market.
The CFPB gives the following debt-to-income ratio example:
If you pay $1,500 a month for your mortgage and another $100 a month for your car loan and $400 for your remaining debts, your monthly debt payments total $2,000. If your gross monthly income is $6,000, then your debt-to-income ratio is 33 percent.
If you have any questions on this topic or are in a financial crisis and considering filing for 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.
Related Resources:
http://www.moneytalksnews.com/new-rules-may-boost-your-ailing-credit-score/
