The Consumer Financial Protection Bureau, or CFPB, has found that medical debt has a disproportionate impact on peoples’ credit scores (“Credit alert! Unpaid medical bills unfairly hurt scores“), as the result of a two-year study that looked at five million credit records.
As Herb Weisbaum writes for CNBC, the credit reports aren’t doing a very good job of predicting who is likely to pay back debt, especially those who are behind on their medical bills. “By looking at how people really paid their bills during this two-year period,” wrote Weisbaum, “the CFPB found that the computer models used to create credit scores may overly penalize consumers with medical collections […]”
The words “overly penalize” may be an understatement. To put this in concrete (rather than abstract) terms, poor credit scores can have potential impact on everything from your ability to get a car loan – you know, so you can drive to work and make money – to getting approved on a mortgage loan for a house.
Given that unpaid medical bills figure prominently on many credit reports (Weisbaum reports that half of all collections involve medical debt), this problem needs solving. Weisbaum references the Medical Debt Responsibility Act, which, if signed into law, would require that paid off medical bills be removed from peoples’ credit reports within 45 days.
Unfortunately, according to GovTrack.us, the bill has a 1% chance of being enacted.
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Unpaid Medical Bills Disproportionately Hurt Credit Scores