Big changes coming to credit scoring (that will affect millions credit scores)

[fskimospy]

I tend to agree with PricklyPete and highland145.

Unless it becomes illegal for banks to discriminate based on medical condition (assuming they don't qualify for disability), I'm not sure how anyone can be foreced to lend to someone who has and might incur a load of medical debt thereby reducing the chance of repaying a loan.

No different than not lending to a compulsive gambler which could be considered a medical condition.

Nobody is being forced to do anything, they are simply updating their calculations to better reflect the actual risk present.

Seems like common sense to me as you want to correctly judge risk and not all kinds of debt is equally risky.

 

[xBiffx]

Nobody is being forced to do anything, they are simply updating their calculations to better reflect the actual risk present.

Seems like common sense to me as you want to correctly judge risk and not all kinds of debt is equally risky.

Okay maybe forced wasn't the correct way to state it.

The kind of debt is immaterial when trying to ascertain if someone is capable of repaying a loan. Just because someone has a high credit score doesn't mean they have the ability to repay a loan. I know plenty of people that have shockingly high credit scores given their spending habits and debt.

 

[highland145]

Collateral only works for secured debt of which a huge amount of debt, including credit card debt, is not.

I don't know why collections harassment would be more for medical bills than for any other bill of equal size.

Someone keeps saying that medical is the #1 reason to file. True or not?

I can see the average hard working/bill paying American feeling trapped like a rat on a sinking ship if they get $100K plus bill for a couple of heart stents. "OMG, I always pay my bills but I can never pay that." And then the collectors start. BK is a savior.

Yeah, if they don't care about other collectors then the medical ones won't matter either.

What won't happen is that creditors actually look at a report and decide what's important to them.

 

[fskimospy]

Okay maybe forced wasn't the correct way to state it.

The kind of debt is immaterial when trying to ascertain if someone is capable of repaying a loan. Just because someone has a high credit score doesn't mean they have the ability to repay a loan. I know plenty of people that have shockingly high credit scores given their spending habits and debt.

I 100% agree, and nothing in this calculation change affects that in any way. This is changing how a component of your credit score is calculated that specifically has to do with debts you have not repaid. In such cases the source of that debt seems highly relevant: one is more indicative of irresponsible choices than another.

 

[xBiffx]

I 100% agree, and nothing in this calculation change affects that in any way. This is changing how a component of your credit score is calculated that specifically has to do with debts you have not repaid. In such cases the source of that debt seems highly relevant: one is more indicative of irresponsible choices than another.

I'm fine as long as boob jobs (read voluntary, non life saving), which are medical, are differentiated from emergency room life saving visits. If we find out this is the case, then I guess it doesn't change much.

 

[GoPackGo]

I think if someone was behind on a bill for whatever reason, went into collections and then paid the debt in full that should be a positive on a credit report.

 

[fskimospy]

Someone keeps saying that medical is the #1 reason to file. True or not?

The answer is inconclusive. A large proportion of those who file for bankruptcy have medical debts of some sort, which indicates that those who get medical debts are more likely to be in trouble financially. That's kind of the very nature of medical debt though, it can be large and unexpected. A large, unexpected bill is a great way to send people into bankruptcy.

I can see the average hard working/bill paying American feeling trapped like a rat on a sinking ship if they get $100K plus bill for a couple of heart stents. "OMG, I always pay my bills but I can never pay that." And then the collectors start. BK is a savior.

This is sort of the point IMO. Say you were forced to choose between two people that had both had collections placed on them. One guy had paid every bill he'd ever had except for a $10,000 medical bill that came from a heart attack. Another guy paid all his bills too except that one day he went to Best Buy and bought a $10,000 home entertainment center that he couldn't pay for.

I would rate the first person as more financially responsible than the other even though in dollar and collections terms they are identical. It doesn't mean that you must lend to either one of them, but a credit score is a continuum and to me that's a useful distinction to make.

Yeah, if they don't care about other collectors then the medical ones won't matter either.

What won't happen is that creditors actually look at a report and decide what's important to them.

Credit scores are a service provided to help creditors make those decisions quickly. I don't think they are perfect by any means, but at least to me this seems like a rational choice to make.

 

[xBiffx]

Trying to see both sides of this issue. A big plus would be for people whose employers or potential employers use credit scores to sort of test for "trustworthiness." This is especially common for government contractors who are seeking security clearance.

 

[highland145]

I think if someone was behind on a bill for whatever reason, went into collections and then paid the debt in full that should be a positive on a credit report.

+1 but I don't know if it is. Think it may have been mention earlier.

The answer is inconclusive. A large proportion of those who file for bankruptcy have medical debts of some sort, which indicates that those who get medical debts are more likely to be in trouble financially. That's kind of the very nature of medical debt though, it can be large and unexpected. A large, unexpected bill is a great way to send people into bankruptcy.



This is sort of the point IMO. Say you were forced to choose between two people that had both had collections placed on them. One guy had paid every bill he'd ever had except for a $10,000 medical bill that came from a heart attack. Another guy paid all his bills too except that one day he went to Best Buy and bought a $10,000 home entertainment center that he couldn't pay for.

I would rate the first person as more financially responsible than the other even though in dollar and collections terms they are identical. It doesn't mean that you must lend to either one of them, but a credit score is a continuum and to me that's a useful distinction to make.

Absolutely but if the medical is going to drive them to BK, I'd like to know. Most people are decent, want to do the right thing and pay their bills. BK is a way out regardless of the possibility that their sore might not be as badly affected.

Trying to see both sides of this issue. A big plus would be for people whose employers or potential employers use credit scores to sort of test for "trustworthiness." This is especially common for government contractors who are seeking security clearance.

Thread here a while ago on that. For security/money handling, I say yes. For most other jobs, I'd have to see a case by case.

 

[GoPackGo]

+1 but I don't know if it is. Think it may have been mention earlier.
Absolutely but if the medical is going to drive them to BK, I'd like to know. Most people are decent, want to do the right thing and pay their bills. BK is a way out regardless of the possibility that their sore might not be as badly affected.




Thread here a while ago on that. For security/money handling, I say yes. For most other jobs, I'd have to see a case by case.

It's not... a few years ago I ran into a bit of financial bad luck. I ended up paying back nearly 7000 dollars in debt off - paid in full...it sucks when it shows negative item...collections...balance ZERO

 

[highland145]

It's not... a few years ago I ran into a bit of financial bad luck. I ended up paying back nearly 7000 dollars in debt off - paid in full...it sucks when it shows negative item...collections...balance ZERO

Yep and the rules aren't clear to lenders. I've been seeing paid collections for years and couldn't get an answer of the effect on the score or of any other report change.

I would like to be able to tell my customers "fix this, ignore this, this is the results...."