A Credit Score That Ignore The Innocuous Mistake

Credit scores don’t differentiate between people whose credit suffered for an innocuous reason, and consumers who can’t keep up with their credit card payments after a wild shopping spree at Best Buy.

But now, at least one major credit score generator,VantageScore Solutions, has decided to ignore collection actions on credit reports–more than half of which are typically tied to medical debts–as long as the collections are paid.

The company found that paid collections are less accurate at predicting future defaults than looking at unpaid collections in combination with a variety of other factors, like the age of consumers’ accounts and the size of their loans.

Proposed legislation that was reintroduced in Congress this year to require consumer┬áreporting agencies to remove fully paid or settled medical debt information from consumers’ credit reports within 45 days of the debt’s resolution.

That sort of fix could potentially help some of the estimated seven million people who reported that a billing error prompted a collection agency to contact them in 2012.

Story by Tara Siegel Bernard for The New York Times.

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