Talking about credit scores always brings to mind the song “Blues in the Night”: A credit score is certainly a worrisome thing that will lead you to sing the blues in the night. A low credit score can mean no car loan or higher interest rates for mortgage loans. As a consumer, it is hard to see a credit report with that low three-digit number on it and not feel bad about yourself.

What many of us may not realize is that our credit scores do not always reflect debts that we can control. There may be no revolving credit accounts that are 90 days past due, and no outstanding loan payments, but a medical bill held up by the insurance company can drag that score down.

The Consumer Financial Protection Bureau recently released the results of research that may convince the credit score companies and Congress to change how medical bills figure into a credit score. The CFPB understands that medical debt is different from other debt: Most people don’t choose to have a medical emergency, and very few people know just how much medical care will cost before they get home from the doctor’s office.

An invoice for a doctor’s appointment is a mix of a black box — that is, an unknowable process — and a Rube Goldberg machine. The doctor’s office first calculates what each service costs based on standards set by the federal government. The next step is for the doctor’s office to send the claim to the insurance company.

If insurance were straightforward — if it were as easy as 80/20 sounds — it would be easier to figure out the bottom line. Instead, insurance companies deduct co-insurance and other discounts that help the consumer in the end but that make predicting the total amount almost impossible.

What the CFPB discovered was that, given the unpredictable, even inscrutable nature of medical debt, the computer models used to calculate credit scores may give medical debt too much weight. We’ll explain more in our next post.

Source: CNBC, “Credit alert! Unpaid medical bills unfairly hurt scores,” Herb Weisbaum, May 21, 2014