Experts Look to Reduce Medical Bills’ Importance in Credit Scoring

Everyone knows that a person’s credit score is a representation of their likelihood and the ability to repay a loan on time. Most people would agree that those who do not repay loans on time as a result of mismanagement of their finances deserve to suffer the negative credit consequences which generally result. But, regulators are now beginning to ask whether those who fall ill, and as a result find themselves unable to repay their medical bills as agreed, should suffer the same kinds of negative credit consequences as those who simply refused to pay loans.

According to a recent study by researchers at the Consumer Financial Protection Bureau, borrowers who have medical debt on their credit reports are no more risky than those who do not. But, as the medical debt itself was more likely to wind up in collections, the credit scores of those with medical debts on their credit reports were on average 16 to 22 points lower than others. The study found that those with the medical bills on their credit reports were actually just as likely to pay all other debts as everyone else, leading the CFPB to determine that having medical debt collections on a person’s credit report is overall less relevant to a consumer’s credit worthiness than being behind on other kinds of bills.

This finding is particularly interesting considering the fact that those with medical bills on their credit reports may be more likely to have suffered injuries and illnesses which affected their abilities to work and earn the money necessary to pay their bills on time. One way the U.S. Congress can help resolve the situation is to pass the Medical Debt Responsibility Act, which would require credit bureaus to remove medical debt from credit reports once the bills have been paid.

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