It should also provide time for consumers to get funds together to pay balance bills, or to finally address that small medical bill forgotten at the bottom of the mail pile.
In addition, the bureaus have agreed to be diligent about pulling off medical debts that are belatedly paid by insurers after the 180th day. Be sure to check your credit report at AnnualCreditReport.com to ensure those old medical debts are coming off as they should.
The latest numbers from the Consumer Financial Protection Bureau (CFPB) show that some 43 million Americans have an average of $579 in medical collections on their credit reports. Moreover, the CFPB finds 15 million of those people otherwise handle credit well; the medical debt is the sole factor fouling up their credit.
So what we’re seeing here is an effort from the credit scoring industry to give people who have medical debt a break.
To that end, the upcoming VantageScore 4.0 scoring model being introduced this fall by the three main credit bureaus will give less weight to medical collections versus other types of consumer debt.
(Editor’s note: VantageScore 4.0 is not to be confused with the FICO scoring model from Fair Issac Corporation. Your FICO score is widely used to assess credit risk in most consumer lending scenarios; your VantageScore is not.)
No matter how you slice it, the credit scoring tweaks should be a boon to consumers who only have medical debt on their reports. FICO estimates the boost to someone in medical collections but with no other debt will be somewhere in the 25-point range.
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