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Medical bills counted differently on new credit report scores

Imagine working your entire life to build up a solid credit score. You were preparing to buy a house or to get a new car when you suddenly faced a medical emergency. Now, your hospital bills have arrived and you're trying to work out how to pay them or cover the debt. The next thing you know, the debts have shown up on your credit report and ruined your chances of getting the loan or credit you wanted.

Sound familiar? Medical bills can drag you down with debt, and even a short stay in a hospital without insurance can be devastating to your finances. Interestingly, while medical bills can hurt your credit report, the way medical debt is included on the report may change.

With the newest FICO model, medical debts are not treated the same way as credit debts. Because of the difference in how the debts are treated, those with unpaid medical debt could see an immediate rise in their credit rating of around 25 points if they have no other blemishes.

Under the new settlement reached with several states, the nation's credit report services won't be able to add medical debt to a credit report for at least 180 days. This gives patients more time to work out how to pay a debt, especially when settlements, insurance policies and various funding sources are being worked out.

According to a report, half of all the negative entries on credit reports involve medical bills. That means that at least one out of every five adults in America is affected by medical debt and its influence on their credit scores. Many times, these bills show up on credit reports as debts before settlements or arrangements can be made, which can be out of a patient's hands.

Source: BobSullivan.net, "Victims of medical bills domino effect might finally get some relief," Bob Sullivan, July 22, 2015

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