Credit Score Calculations Changing to Handle Medical Bills More Fairly

As a personal injury attorney, I often work with Oklahoma City-area clients whose lives have been turned upside down, not only by an auto accident or other serious injury, but by an avalanche of medical bills stemming from the accident that they are unable to pay.

I am happy to see that the company behind the FICO credit score is making some much-needed improvements in how it handles late or unpaid medical bills. As a result of the changes, some consumers in Oklahoma and across the nation will see a bump of 25 points or more in their credit scores.

Fair Isaac Corp., which provides the FICO score, has announced that it will implement two significant changes:

• The impact of unpaid medical bills on a person’s credit score will be diminished.

• Debt that has gone to collections but has subsequently been paid or settled will now be ignored on credit scores and credit histories.

People who had good credit before being hit with unexpected medical bills they can’t pay or have to pay over time will not take such a big hit on their credit scores, and the impact will not be permanent, if they are able to eventually pay off the debt.

Of course, the changes won’t stop collection activity.

Some Statistics

A lot of people are going to welcome these changes.

• 25% of U.S. families report having difficulty paying medical bills.

• 10% of families report having medical bills they simply cannot pay.

• 35% of adults have unpaid bills and debts which have been turned over to collections and credit-reporting agencies.

• The percentage of debt in collections that is health care-related is put at 38% to more than 50% of all collection debt, according to various sources.

A Good Step Forward

These changes are good ones. Unpaid medical debt is not the same as a delinquent car payment or a maxed out credit card. Medical debt is often not caused by irresponsibility or poor money management.

As a matter of fact, people who have big unpaid medical bills are often people with high deductibles, who in turn are often people who are paying for health insurance out of their own pockets. People who are not part of a group plan and must pay for individual health insurance pay monthly premiums that would shock the millions of consumers who are fortunate enough to receive a health insurance benefit from their employer.

Paying such high premiums for the protection of health insurance is a very responsible act. However, despite being responsible, if a medical emergency occurs, such people can still find themselves with thousands of dollars of out-of-pocket medical bills.

Nobody asks for a serious accident or illness, and people who have experienced such tragedies should not be penalized for it by the credit bureaus.

Besides, sometimes a medical bill gets lost in the “insurance shuffle.” The bill is submitted to the insurance company for payment, and if your insurer declines payment or pays a reduced amount, the bill may go to collections before you ever know that you are expected to pay.

Good for Consumers, Good for Business

Some consumers will see an immediate improvement in their credit scores. FICO said consumers whose only credit blemishes are unpaid medical bills may see an increase of 25 points or more. Some people who have been denied credit may now obtain approval.

An improved credit score may translate into savings of thousands of dollars on a mortgage, car loan or other credit. It just isn’t fair that someone should have to pay more for a home or a car because they experienced a personal injury.

This change is also good for business: More credit means more purchases. Our economy is still chugging along in recovery mode, and these improvements may provide another modest boost.

About 90% of lenders are guided by FICO scores in making credit decisions. One competitor, VantageScore Solutions, recently made similar changes. Last year VantageScore began excluding some categories of medical debt from credit score calculations, and earlier this year it began excluding paid collections.

You May Need Legal Help

If you are an Oklahoma resident who has experienced a personal injury or wrongful death, gargantuan medical bills may be one of the consequences you are facing. You may need the help of a personal injury attorney to obtain the financial compensation you are entitled to.

A good attorney will not only help you bring a lawsuit, but will also help handle and negotiate with medical providers and collection agencies while you are pursuing the legal action. Sometimes an attorney can even negotiate with your health providers to reduce your medical bills.

For a free consultation about your legal rights after experiencing a personal injury or wrongful death, contact Hasbrook & Hasbrook. You may contact us by telephone (866-416-4737), email (cth@hasbrooklaw.com) or use our website contact form: Contact Us.