Arizona families struggling with medical debt may be relieved to know that FICO will be changing the weight of medical debt in the determination of one’s credit score. An estimated one-third of Americans deal with difficulties in paying medical debts, and this is also the leading reason for bankruptcy filings in the nation. It is reported that approximately 64 million individuals have medical bills in collections listed on their credit reports.
With the changes to be made by FICO, it is expected that the average individual will experience an increase of approximately 25 points on his or her credit score. This is dependent on a positive history of bill payment in other areas. Medical debts in the past that have been paid will not be used in score computations, and less weight will be ascribed to unpaid medical bills.
Unfortunately, the change in FICO scoring does not change the fact that Americans are struggling to manage the increasing costs associated with medical care. Even those with insurance still face challenges in paying medical bills. In many cases, individuals use easy sources of credit, such as credit cards, to cover medical costs. However, there may be a greater benefit in allowing the medical bill to be reflected as such on a credit report rather than transferring the debt into a revolving credit account if there is a risk of overextending one’s finances.
Although FICO scoring may ease the impact of medical debt, high medical expenses may continue to create difficulties for many people. If one’s finances become too stretched to manage basic living expenses, it may be necessary to consider bankruptcy as a way to eliminate aggressive collection activities and restore financial stability. A bankruptcy lawyer may be helpful in explaining the options and the requirements that must be met before an individual can file for bankruptcy.
Source: Forbes, “Medical Debts Will Soon Weigh Less On Your Credit Score, But They’re Still A Problem“, Christina LaMontagne, August 26, 2014