Changes in FICO Models That Could Improve Your Scoring
Even though FICO Score models have changed over the past several years to help consumers fair better with credit and loans, debt you owe will still be reported. One of the changes this year that will help consumers starts on July 1st. The three main credit bureaus will no longer show satisfied medical debt that was turned over to collections on your reports. What this means is that, if you paid off the medical debt collection, it will be removed from your report instead of remaining as a paid collection. If you have paid your debt, the discrepancy should not still be held against you; having it removed allows you to start fresh. This change helps when lenders review your reports and can see that you have no or few collections.
Medical debt has been a major reason why many families go into debt and sometimes financial ruin. When I hear the phrase “unexpected bills”, I am more inclined now to believe that it is medical related than from any other source. There are expenses that can be incurred during any doctor, clinic, or hospital visit that is not shared with you when checking in or out. Then a few weeks later, you receive a bill for some test, lab, or other miscellaneous fee and the payment is “due upon receipt”. If you are like many, this bill comes at the same time that everything else is due and you may not have the extra funds to pay. To mitigate the damage that can ensue, you should ask at the front desk when checking in for your appointment if they could provide a detailed receipt of your visit upon checkout. During your visit with the doctor or physician assistant (PA), ask if there will be any additional charges outside of that office visit, and upon checkout, ask again if there will be any fees from other sources associated with your visit. Most of all get that detailed receipt with the accompanying medical codes before leaving. The codes are helpful when dealing with the insurance company in case you are denied coverage for a particular treatment and then that payment ends up on your report.
The other change that could help your score is that the timeframe when medical debt will be reported would increase from six-months to a year. This increase can allow you extra time to pay if you do receive a bill after the visit. Also, amounts of $500 or less will not be recorded as bad debt. For some, these changes may boost their scores immediately if medical debt is their only source of credit pain. Having these changes in place can be just the thing you need to lift your score and credit. However; you still need to be diligent in reading the fine print to know exactly what debt is coming your way and also know which payments valid and still need to be paid unexpected or not. Also, make sure you ask questions before, during, and after your visit. Track your reports and scores, so you are not blindsided by unknown charges so you always know where you stand before needing to access any new credit.
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Written By:
Michelle Alexander
AJM Financial, LLC.