This morning I read, in the WSJ, that an astronomical 75 million people are struggling under unpaid medical debt. "More than half of all debt-collection activity comes from medical bills, according to the Federal Reserve." It's one factor that convinced Fair Isaac to announce a new model for credit scoring. Fair Isaac has removed several types of late payment activities from the FICO calculus.
Everyone is hoping that banks will now "be able" to issue more loans - and juice the economy - with these revised FICO numbers. Maybe so, although I do have to wonder whether banks actually consider the newly deleted factors relevant to their loan activity. If they don't, why have they been so reliant on FICO? It seems to me that creating a FICO alternative can't be that difficult, given the existence of three competing credit agencies. But in a similar vein, I wonder why banks would rely on the new FICO numbers of they DO care about late-paid bills.
I'm interested in something else, though. These unpaid medical bills. It sounds to me like one benefit to having more people insured is that this has the potential to free millions of people - or, prospectively, protect millions of others - from the vise of bad credit. We've normally heard about the individual benefits of Obamacare, as well as the benefits to the medical industry. Though I may have missed it, I haven't heard anyone link Obamacare to a boost in the housing industry and other are businesses dependent on freely available debt.
I hope that FICO's tweak is helpful in making home loans more available to otherwise credit-worthy individuals. But I'm even more hopeful that the ACA will yield this, and other not-yet-seen-benefits, by reducing the number of people strangled by medical debt.