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| − | + | Should you happen to be hit by a bus today, expect three forms of misery.1. It will hurt.2. You鈥檒l be off work, and probably lose pay.3. You鈥檒l face big medical bills, <a href=http://www.museosangennaro.com/Public/anel.php> Christian Louboutin Shoes Sale</a> and that may wreck your credit.Since you didn鈥檛 plan to be hit by a bus, you may not be able to pay those medical bills on time and they鈥檒l end up with collection agencies.To the computers that make most credit decisions, your moment of bad luck makes you look like a deadbeat. You鈥檒l be sentenced to seven years of credit purgatory 鈥?banned from the better deals on mortgages, auto loans and credit cards.The good news here is that FICO no longer thinks that鈥檚 proper, and FICO carries some clout. It is the nation鈥檚 main credit scoring company. Its latest credit scoring revision 鈥?due for release this fall 鈥?gives less weight to delinquent medical debt.Someone whose only black mark is medical debt would see their scores rise 25 points, FICO says.The system has a gift for other troubled consumers too: It ignores all debt that went to a collection agency but was later paid in full. No longer would it curse your credit for seven years.Debtors, however, should not break into cheers. Lenders will be very slow to adopt the new FICO model, and some probably never will.Fannie Mae and Freddie Mac, which dictate the rules for conventional mortgages, still haven鈥檛 adopted FICO revisions made in 2009. Many other lenders haven鈥檛 either.鈥淚t will have no effect in the very short term,鈥?said , director of consumer education at Credit.com and an author of books on consumer credit. 鈥淥ver time, hopefully, it will offer change for consumers.鈥漈hat鈥檚 sad, because a single collection account can destroy a credit score.The federal Consumer Financial Protection Bureau says a credit score of 780 would drop to 665 with one debt referred to collectors. That would turn a borrower with sterling credit into an outcast who would have a hard time landing a decent conventional mortgage.Medical <a href=http://www.alportico.net/prodotti/christianlouboutin-sale.jkmsw.php>Christian Louboutin Heels</a> debt blindsides people. Families don鈥檛 budget for heart attacks.Employers spent the past decade raising deductibles and co-pays, so health insurance is paying less. A family can fall behind on the bills.Add to that the ridiculous complexity of medical billing and health insurance. Sick people often can鈥檛 tell what they owe and what the insurance company should pay.鈥淧eople will find a medical debt in collection without realizing they ever owed it,鈥?said FICO spokesman Anthony Sprauve.Someone caught in that mess is not a deadbeat. When the crisis passes, they鈥檒l catch up on what they owe.鈥淥ur analysis of the data shows that if unpaid medical debt is the only negative, it is not an indication of financial trouble or inability to pay debts. It鈥檚 an anomaly,鈥?Sprauve said.In fact, that鈥檚 just what the U.S. Consumer Financial Protection Bureau concluded last May in a report that urged lenders to treat overdue medical debt more kindly.It鈥檚 a little harder to understand why FICO is now forgiving people who defaulted on other debts but later paid them off. If someone fell behind once, aren鈥檛 they more likely to default again?Not if they have paid it off, according to FICO. 鈥淭hat typically means there are improving their financial situation and heading for a better place,鈥?Sprauve said.VantageScores, FICO鈥檚 smaller competitor, made that same decision last year. FICO contends it has 90 percent of the credit score market.So, if all this makes sense, why aren鈥檛 <a href=http://capstone.edu.sg/images/gucciusaonlineoutlet.php>gucci outlet</a> lenders hurrying to adopt it?Partly it鈥檚 caution. FICO just sent its new formula to the three big credit agencies 鈥?TransUnion, Equifax and Experian. They鈥檒l check it against their own data to see if it better predicts defaults.Then they鈥檒l pass it on to their lender clients, who may or may not adopt it. Many have their own tweaks on FICO scoring systems, and they鈥檒l want proof that the new method is better than what they鈥檙e using.Acceptance is not a slam dunk. Some lenders think it may let true deadbeats slide by.鈥淭here is a form of unpaid medical debt that is not related to a life event; it relates to weak, irresponsible consumer debt servicing behavior,鈥?Tom Showalter, chief analytics officer at Digital Risk, a large loan processor, noted in a statement. 鈥淪uch a consumer is not all that different from one who charges a credit card and then fails to pay.鈥? | |
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Revision as of 03:27, 14 September 2014
@@@ Should you happen to be hit by a bus today, expect three forms of misery.1. It will hurt.2. You鈥檒l be off work, and probably lose pay.3. You鈥檒l face big medical bills, <a href=http://www.museosangennaro.com/Public/anel.php> Christian Louboutin Shoes Sale</a> and that may wreck your credit.Since you didn鈥檛 plan to be hit by a bus, you may not be able to pay those medical bills on time and they鈥檒l end up with collection agencies.To the computers that make most credit decisions, your moment of bad luck makes you look like a deadbeat. You鈥檒l be sentenced to seven years of credit purgatory 鈥?banned from the better deals on mortgages, auto loans and credit cards.The good news here is that FICO no longer thinks that鈥檚 proper, and FICO carries some clout. It is the nation鈥檚 main credit scoring company. Its latest credit scoring revision 鈥?due for release this fall 鈥?gives less weight to delinquent medical debt.Someone whose only black mark is medical debt would see their scores rise 25 points, FICO says.The system has a gift for other troubled consumers too: It ignores all debt that went to a collection agency but was later paid in full. No longer would it curse your credit for seven years.Debtors, however, should not break into cheers. Lenders will be very slow to adopt the new FICO model, and some probably never will.Fannie Mae and Freddie Mac, which dictate the rules for conventional mortgages, still haven鈥檛 adopted FICO revisions made in 2009. Many other lenders haven鈥檛 either.鈥淚t will have no effect in the very short term,鈥?said , director of consumer education at Credit.com and an author of books on consumer credit. 鈥淥ver time, hopefully, it will offer change for consumers.鈥漈hat鈥檚 sad, because a single collection account can destroy a credit score.The federal Consumer Financial Protection Bureau says a credit score of 780 would drop to 665 with one debt referred to collectors. That would turn a borrower with sterling credit into an outcast who would have a hard time landing a decent conventional mortgage.Medical <a href=http://www.alportico.net/prodotti/christianlouboutin-sale.jkmsw.php>Christian Louboutin Heels</a> debt blindsides people. Families don鈥檛 budget for heart attacks.Employers spent the past decade raising deductibles and co-pays, so health insurance is paying less. A family can fall behind on the bills.Add to that the ridiculous complexity of medical billing and health insurance. Sick people often can鈥檛 tell what they owe and what the insurance company should pay.鈥淧eople will find a medical debt in collection without realizing they ever owed it,鈥?said FICO spokesman Anthony Sprauve.Someone caught in that mess is not a deadbeat. When the crisis passes, they鈥檒l catch up on what they owe.鈥淥ur analysis of the data shows that if unpaid medical debt is the only negative, it is not an indication of financial trouble or inability to pay debts. It鈥檚 an anomaly,鈥?Sprauve said.In fact, that鈥檚 just what the U.S. Consumer Financial Protection Bureau concluded last May in a report that urged lenders to treat overdue medical debt more kindly.It鈥檚 a little harder to understand why FICO is now forgiving people who defaulted on other debts but later paid them off. If someone fell behind once, aren鈥檛 they more likely to default again?Not if they have paid it off, according to FICO. 鈥淭hat typically means there are improving their financial situation and heading for a better place,鈥?Sprauve said.VantageScores, FICO鈥檚 smaller competitor, made that same decision last year. FICO contends it has 90 percent of the credit score market.So, if all this makes sense, why aren鈥檛 <a href=http://capstone.edu.sg/images/gucciusaonlineoutlet.php>gucci outlet</a> lenders hurrying to adopt it?Partly it鈥檚 caution. FICO just sent its new formula to the three big credit agencies 鈥?TransUnion, Equifax and Experian. They鈥檒l check it against their own data to see if it better predicts defaults.Then they鈥檒l pass it on to their lender clients, who may or may not adopt it. Many have their own tweaks on FICO scoring systems, and they鈥檒l want proof that the new method is better than what they鈥檙e using.Acceptance is not a slam dunk. Some lenders think it may let true deadbeats slide by.鈥淭here is a form of unpaid medical debt that is not related to a life event; it relates to weak, irresponsible consumer debt servicing behavior,鈥?Tom Showalter, chief analytics officer at Digital Risk, a large loan processor, noted in a statement. 鈥淪uch a consumer is not all that different from one who charges a credit card and then fails to pay.鈥?
