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Credit scores may go up for Americans with medical debt

Ohio residents with unpaid medical bills may soon notice a rise in their credit scores. FICO has recently announced changes to the way that medical debt is calculated, and the average person with medical debt will reportedly see a 25-point increase in their credit score. As part of the new FICO model, paid medical bills will be eliminated from a person's credit report, and unpaid medical bills will have less of an impact.

The new scoring model will reportedly help millions of Americans to qualify for the loans that they need to secure things like cars and homes. Right now, the most common reason that Americans file for personal bankruptcy is overwhelming medical debt. With increased FICO scores, the 64 million consumers with at least one medical collection on their credit report may have more financial options.

According to the director of public relations for FICO, the company has determined that a consumer with unpaid medical debt is not necessarily unlikely to repay future debts. Medical and non-medical collection debts will now be differentiated on a person's credit score. This change could give pause to the many Americans who would otherwise pay off their medical bills with a credit card. Once the medical debt goes onto a credit card, the debt would become non-medical and subject to normal scoring criteria.

A higher credit score may help some people to qualify for loans, but it won't stop debt collectors from pursuing repayment through aggressive and sometimes harassing methods. For individuals who are faced with these issues, filing for bankruptcy can be a way to get a fresh start. Before making this important decision, a person considering filing for bankruptcy will likely wish to consult with a bankruptcy law attorney.

Source: Forbes, "Medical Debts Will Soon Weigh Less On Your Credit Score, But They're Still A Problem", Christina LaMontagne, August 26, 2014

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