Two months ago, I sat across a table from a woman on the verge of tears. As she clenched her jaw and cast her eyes towards the ground, she disclosed her overwhelming financial situation. An unexpected medical expense depleted her savings and sent her into a downward spiral of financial problems complete with collections agencies pestering her for payment. Even though she paid her other bills on time, avoided consumer debt and worked two jobs to support her family while trying to pay off her medical bills, she felt bankruptcy was the only way out.
Unfortunately, her story is familiar to many other hard-working, responsible Americans around the country. An unexpected medical expense can quickly send the most diligent and responsible people into dire financial straits. Those unpaid debts go to collections, causing a major hit on a credit report and score. Once a person’s score drastically drops, it becomes hard to get a loan to refinance debt without a staggeringly high interest rate.
As of July, about 64.3 million consumers in the U.S. had a medical collection on their credit report, according to data from credit bureau Experian (EXPN), and a hope is on the horizon for them.
FICO (FICO) –- the company behind credit scores -– on Thursday announced an unprecedented change to its scoring model: FICO Score 9 will change the way in which paid collection agency accounts, unpaid medical bills and non-medical bills impact a score.
What Are the Changes?
Read about the changes and why they matter at DailyFinance