Credit scores, like it or not, dictate many aspects of a person’s financial life. Good or bad credit can have a significant bearing on the favorability of interest rates attached to a loan – and whether or not a loan is offered at all.

Unfortunately, when people fall behind on bills and debt collection efforts commence, credit scores generally take a hit. This means that a period of financial misfortune can have a lasting impact in terms of a person’s ability to borrow money for homes, vehicles, education or important investments.

Although accumulating medical bills is often the result of an uncontrollable circumstance, those who fall behind on payments may still suffer damage to their credit. This is something that has come to concern officials with the Consumer Financial Protection Bureau.

According to a recent report from the CFPB, the agencies that assign credit scores do not properly assess or categorize medical debt. Failure to pay medical debt is treated the same as failing to service other kinds of debt.

The problem with this is that medical bills can stack up quickly and unexpectedly. A single visit to the hospital could wind up costing a person thousands out of pocket, which would create financial shock even for fiscally savvy people.

Behind the CFPB’s concerns is research that shows medical debt generally doesn’t have an impact on a person’s ability to keep up with bills and loan payments. The agency’s study found that people who had credit scores that were damaged by medical bills in collection generally were able to pay bills at a rate equal to those who had higher credit scores.

Recalibrating the criteria for credit scores will require reform. In the mean time, many people are currently dealing with the effects of medical debt. One of the main goals of debt relief is to relieve the burden in order to allow people to get their credit scores and financial lives back on track.

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

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