VantageScore Excluding Medical Bills from Credit Scores

August 12, 2022

The FICO competitor says unpaid medical collections aren’t a good predictor.

On Tuesday, VantageScore Solutions LLC said that it would stop including medical bills that have been sent to collections in its credit scoring model, according to a report from the Wall Street Journal.

The VantageScore, which was created as a joint venture between the major credit reporting agencies, is not used as widely as the FICO score, but the move builds on recent changes from the credit bureaus and can result in more positive changes down the road.

KEY TAKEAWAYS

The VantageScore credit scoring model will soon no longer take unpaid medical collections into account when calculating scores.

The decision comes on the heels of changes made by the credit bureaus to reduce the impact of medical collections on consumer credit files.

The credit scoring company cites the fact that medical bills in collections have little predictive value when it comes to a consumer’s creditworthiness.

The company says that millions of consumers may see an increase of up to 20 points in their VantageScore credit scores.

VantageScore Takes the Industry’s Next Step in Addressing Medical Debt

Despite widespread health insurance coverage in the United States—more than 90% of the population has some form of health insurance—about 9% of Americans have medical debt, according to a recent analysis by the Kaiser Family Foundation.

Among the 23 million people in question, three million have more than $10,000 in unpaid medical bills, and Black adults, people in poor health, and people with disabilities are disproportionately affected.

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This article was originally published on Investopedia on August 10, 2022.