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VantageScore modifies credit score calculation to accommodate for medical debt changes

In a move that could impact auto financing, VantageScore recently announced further steps in supporting consumers affected by medical collection debt.

VantageScore said through a news release that the company completed an extensive analysis of how consumer credit score models are impacted by recent changes to how medical collection accounts are reported, including changes brought about by the COVID-19 pandemic.

Based on the findings, VantageScore made the decision that neither of its most recently introduced scoring models — VantageScore 3.0 and 4.0 — will continue to use this data in the calculation of consumers’ credit scores, regardless of the amount owed or the age of the collection.

According to the news release, VantageScore expects the adjustment to the models will be completed and operational by mid-October.

As a result of this decision, VantageScore estimated consumers with this type of information in their credit files will likely see scores increase by as much as 20 points when either the VantageScore 3.0 or 4.0 models are used.

Impacts to model performance are expected to be minimal for a large segment of the population, according to the analysis.

According to a Consumer Financial Protection Bureau report released on March 1, medical collection accounts appear on 43 million credit reports and approximately 58% of bills that are in collections and on people’s credit records are medical bills as of the second quarter of 2021.

By 2023, 75% of medical collections will be removed and VantageScore said it is taking advantage of the opportunity to reassess the predictive value of using this information in its credit scoring models.

The company went on to say that impact to the VantageScore models’ predictive performance is expected to be minimal for a large segment of the population and both VantageScore 3.0 and 4.0 will continue to rank order effectively.

“Across our credit scoring models, medical collections accounts have minimal impact on the predictiveness of creditworthiness for a large segment of the population. As such, we are making the proactive decision to remove the information from our models entirely,” VantageScore president and chief executive officer Silvio Tavares said. “Our decision reflects VantageScore’s continued effort to offer the most predictive scoring models and to help increase financial inclusion.”

For more information, visit https://vantagescore.com/medical-debt-and-the-changes-to-vantagescore/.

Equifax, Experian & TransUnion extend free credit report availability

Since the pandemic still is causing plenty of problems, the three nationwide credit reporting agencies are continuing information availability for consumers that first launched when COVID-19 arrived.

This week, Equifax, Experian and TransUnion extended their pandemic response service by offering free weekly credit reports to consumers through the end of 2022.

The companies said this benefit will continue to help consumers across the country manage their financial health during the ongoing hardship and economic uncertainty caused by COVID-19.

The chief executive officer of each company — Mark Begor of Equifax, Brian Cassin of Experian and Chris Cartwright of TransUnion — provided a joint statement on the decision to increase their offerings for the next year.

“We are committed to helping consumers to strengthen their credit and secure their financial future,” they said. “The combined pressures of job changes, inflation, market uncertainty and health anxiety continue to present consumers with enormous challenges.

“Our industry’s hope is to support consumers as they make decisions — big and small — by making it easier to regularly track their financial health,” they continued.

Equifax, Experian and TransUnion reiterated that consumer credit reports are a factual record of credit activity and payment history used by lenders, creditors, service providers and other businesses to extend financial opportunities and other offers to people.

The companies pointed out that credit reports play an important role in financial health for consumers, businesses and the economy.

Consumers can access their free weekly credit reports from each of the three credit reporting agencies at www.annualcreditreport.com.

“Consumers should review all items appearing in each section of their credit reports. If an error is identified, consumers should contact the credit reporting agency immediately to correct that information,” the companies said in that statement.