A shift in perception of medical debt

The effect of medical debts on credit scores has been a hot topic in recent years as Americans have struggled with the rising cost of health care. The CFPB, consumer advocates and

some lawmakers argued that medical bills are fundamentally different from other collections and shouldn’t have the same impact on people’s scores.

Ultimately, FICO and rival VantageScore agreed. The most recent versions of their scores, FICO 9 and VantageScore 3.0, treat medical collections less harshly and ignore all paid collections. The problem is that those latest versions of the credit scoring formulas aren’t yet in widespread use and there’s no predicting when they will be.

Until they are, medical collections will continue to devastate millions of people’s scores. Even those who expect to benefit from the credit bureau changes need to be diligent, the consumer law center’s Wu says. After Oct. 1, when the changes are expected to be complete, consumers should check their credit reports and dispute any paid medical collection that should have been dropped. The dispute process can take 30 days or more.

“You don’t want to be in a position where you’re checking right before you get a mortgage or you get a car,” Wu says. “You need time to deal with it.”

About 43 million Americans have medical collections on their credit reports, according to the Consumer Financial Protection Bureau. That’s one in five U.S. adults who have credit reports.