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Tuesday, May 20, 2014

CFPB: Medical Debt Overly Penalizes Consumer Credit Scores

The CFPB released a report finding that consumer credit scores may be overly penalized for medical debt that goes into collections and shows up on their credit report. The study found that scoring models may underestimate creditworthiness of consumers with medical debt in collections and also may not be crediting consumers who repay debt that has gone to collections. CFPB Director Richard Cordray said:

Getting sick or injured can put all sorts of burdens on a family, including unexpected medical costs. Those costs should not be compounded by overly penalizing a consumer’s credit score. Given the role that credit scores play in consumers’ lives, it’s important that they predict the creditworthiness of a consumer as precisely as possible.

Specifically, the study found that credit scores underestimate creditworthiness of consumers who owe medical debt by 10 points. For consumers who have paid off medical debt, credit scores underestimate creditworthiness by up to 22 points.

Read more.

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