The credit reporting agency FICO has stated that it will be changing the way that it handles its scoring of medical debt by reducing the impact that such obligations have on people’s credit scores. According to FICO’s director of public relations, just because someone has outstanding medical bills, it does not mean that they are likely to be late in making other payments. It is projected that people with outstanding medical debt but an otherwise good payment history will see their credit scores rise by an average of 25 points.
While the change in scoring methods is good news for many people, the reality is that medical debt is still a major issue. Based on statistics contained in a report from a health care research foundation, in the last two years, nearly 30 percent of Americans went through their savings to pay off medical bills.
Having medical insurance does not protect someone from having to deal with large medical expenses. Another recent study has revealed that approximately 10 million people with insurance struggled to manage medical bills in 2013, and that number may increase due to the growth of high-deductible medical plans. It is widely reported that medical debt is the leading cause of people filing for bankruptcy.
While changes to the way that FICO deals with medical debt may help some people, it is of little assistance to people who are unable to make ends meet or have debt beyond their ability to pay back. In these circumstances, a bankruptcy attorney might be able to help individuals figure out if filing for bankruptcy is the right choice and, if so, which type of filing best suits their individual situations.
Source: Forbes, “Medical Debts Will Soon Weigh Less On Your Credit Score, But They’re Still A Problem“, Christina LaMantagne, August 26, 2014