Thomas McCutcheon

Almost every corner of the South, every race, every income bracket, appears to have lower credit scores than the rest of the nation.

The region’s poor credit means Southerners are paying more to borrow money, assuming they can qualify for loans at all. That sets them back in everything from car and home purchases to credit card rewards.

The reason why credit scores are so low in the South is connected to medical debt because that’s the most common type of unpaid bill that people have. The South easily has the highest levels of medical debt in the country. Personal injury cases often produce medical bills. Some go unpaid until the case is resolved.

Credit-rating agencies and their partners such as Fair Isaac Corp. (FICO) reduced the role that medical debt plays in their scores in 2017 following a settlement between credit-rating agencies and 31 states’ attorneys general. Still the share of residents with overdue medical debt remain more strongly linked to a county’s credit score than any other factor, including debt related to car loans, credit cards and student loans.

Last year, the federal Consumer Financial Protection Bureau (CFPB) issued a report finding that medical debt is “an unexpected, unwanted, and financially devastating expense” that is “far less reliable and predictive of people’s ability to pay their bills” than other kinds of borrowing.

As a result, the big three credit-reporting bureaus Experian, TransUnion and Equifax announced steps to further reduce medical debt’s influence on credit scores.

Starting this year, medical bills under $500 will no longer affect your credit report. Even after they’re sent to collections. That should wipe an estimated two-thirds of medical-debt collections from credit reports.

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