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Karen Gibbs

FICO logoGood news for consumers with unpaid medical bills!  The creator of the all-important and most widely followed credit score – FICO – is changing the way medical debts are used to determine your credit score.

Due to lost jobs and expensive health insurance, many consumers are in debt because of large medical bills that may have gone to a collection agency.  A study done by Harvard University points to medical expenses as one of the biggest reasons people file for bankruptcy.

Recognizing the reality of health care costs, debt and the burden it places on consumers, FICO adjusted the way it uses medical debt to rate your credit worthiness.

Under the new system, medical debt won’t be as heavily weighted when calculating your credit score, opening the door to potentially lower interest rates when applying for credit cards, auto loans and maybe even mortgages.  In addition, FICO will no longer ignore already paid debts that had fallen into collection.  Previously, you received no credit for paid-off collection debt still listed on your credit report.

If those medical debts in collection have been paid by you or your insurance company, your credit score could get a real boost as medical collection debt is not considered as bad as other forms of unpaid debt.

Your FICO score is not the same as your scored offered by the three credit ratings agencies; Equifax, Experian and TransUnion, and your actual FICO score is not free. However, you can get a free estimate of your credit score range here. will calculate your actual credit score using your personal financial data. 

You can also pay $20/month for credit monitoring and FICO scores at

Some credit cards, such as Discover, list your credit score on your monthly credit card bill, but it may not be the “official” score.  However, they are useful in determining where you fall on the scale of 300-850; the higher your score, the better.  Companies consider you to be a good credit risk if your score is above 700.  You may have difficulty getting credit with a score below 620. 

Bottom line; pay your debts, on time.  Don’t miss a payment.  If you haven’t already, set up your own credit monitoring system.  You are allowed by law, one free credit report per year from each of the three credit reporting agencies.  Stagger the requests every four months and you will be able to monitor your credit and work to improve your score.  That’s smart thinking about your money.

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