In mid-September 2017, the three national consumer reporting agencies (Equifax, Experian and Transunion) are scheduled to remove the following from credit reports:
- Medical collections less than 180 days old
- Medical collections that are ‘paid by insurance’
The removal of these medical collections is part the National Consumer Assistance Plan (NCAP) which is a comprehensive series of initiatives intended to evaluate the accuracy of credit reports, the process of dealing with credit information, and consumer transparency. In a previous blog , we covered the NCAP-driven removal of civil judgments and certain tax lien information.
The removal of medical collections less than 180 days old is based on the date of first delinquency. Since most medical collections aren’t reported to the CRAs until more than 180 days after the first delinquency, we found that only 0.1% of the total FICO scorable population (roughly 200,000 consumers out of approximately 200 million) has a medical collection less than 180 days old. Medical collections that are identified in the credit file as being ‘paid by insurance’ are even less common.
FICO recently conducted research on a representative sample of millions of US consumers to assess the impact of the NCAP-driven removal of these 3rd party medical collection agency accounts on the FICO® Score. Our results showed that roughly 3 in 4 of the impacted population saw FICO® Score changes of less than 20 points. Most consumers with these medical collections have other derogatory information in their credit files, resulting in minimal impact to their FICO® Scores once these collections are removed.
What should you expect if you have these types of medical collections on your credit report that meet the purge criteria?
Based on FICO’s research findings, chances are the change in FICO® Score will likely be less than 20 points. The precise impact that this change will have on your FICO® Scores really depends on the information contained in the negative items that will be purged, as well as the composition of the other information contained in your credit report.
In conclusion, since NCAP medical collection removals are so rare, we observed virtually no perceptible impact on the ability of FICO® Scores to rank-order risk, volumes above or below Score cut-offs, or bad rates for any given FICO® Score. Lenders can continue to rely on the stability and predictive performance of the industry standard FICO® Score.
*Various content sourced from FICO Research Brief: NCAP Medical Collection Removals are Rare and Have No Material Impact to FICO® Scores
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