Medical Bills Affecting Your Credit Score? Fear No More!
Once upon a time, Bob was just living his normal life of working and spending time with family and friends. Although it was sometimes tough, he never missed a bill payment. Once he was ready to buy his first home, there was a road block, his credit score. His lender had to break the news to him that his score was extremely low and gave him steps on how to raise it. Bob couldn’t help but wonder how this happened, but then he remembered that one time he was in the hospital after his motorcycle accident. His bills were outrageous but he thought his insurance company had covered them. He eventually found out they didn’t and he immediately paid the entire bill in full. Even after paying off that debt, his FICO score was still low and was dramatically affecting his life.
If you have experienced a situation similar to this, you are not alone. In fact, about 64.3 million consumers in the U.S. have a medical collection on their credit report. Currently, these collections remain on a credit report for seven years, even if they have been paid off.
It’s Just Not Fair…
And the Consumer Finance Production Bureau (CFPB) agrees with you. Last May, the CFPB realized something was fishy about this and that it was ruining the lives of millions of Americans, so they started to do some research. After the CFPB found way too many instances where consumers were innocently being penalized, FICO decided to re-evaluate their system.
With the new model, FICO 9, those of you who have paid your bills will no longer be penalized. Not only that, but unpaid medical bills will also be lightened up; they will now carry a lower weight compared to non-medical debt.
What’s The Catch…
Well as great as this news is for everyone, it will only blatantly affect incoming borrowers. For those currently underway with interest rates that could potentially be going down, you’ll need to be a little proactive on this. Once the new model is in place, which is set to be 12 to 18 months from now, current consumers should look around for their options as their credit score will open up a whole new world of low rates. For instance, take a look into refinancing.
It’s Too Good to Be True!
This is really happening and justice is being served, ladies and gents. Bob and millions of Americans who have been trapped by their medical debts are going to be eligible for lower rates and an all-around better financial life. This is a big deal. Let Freedom Ring!
If you are interested in taking a look at where you stand for loan eligibility, contact one of the qualified mortgage professionals at Union Home Mortgage.
*Implementation of the new FICO model has not yet occurred in the mortgage industry. Adoption of new policy date is undetermined.*