Changes coming to FICO credit scores
NEW YORK There are changes coming to FICO a widely used credit score that may raise scores for many consumers Banks credit card issuers auto lenders and other businesses use those scores to decide lending and interest terms A major change is that debts sent to collections and repaid will not count against the score Medical debts will have a smaller effect If your only major bad mark is unpaid medical debt your score could rise by about 25 points FICO says there are three significant changes to its metric used in 90 percent of U S consumer lending decisions Regulators have scrutinized health care debts in May the Consumer Financial Protection Bureau noted penalties for harsh scoring practices.
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FICO
Fair Isaac Corp
U.S
CFPB notes medical debt differs from other debts
The CFPB says medical bills are often more costly and unpredictable due to provider insurer disputes rather than nonpayment. It finds medical debt may depress credit scores by about ten points and urges readers to voice opinions to the Aiken Standard.
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CFPB
FICO update may aid some borrowers amid debt data limits
Greg McBride of Bankrate warns the new scoring method helps many borrowers but not those with very bad or very good credit. It could raise scores for some with medical debt from about 675 to 700 or 725. Urban Institute finds 35 percent have debts in collection. health care bills account for about 38 percent of collections. The impact on those with little credit history remains uncertain as lenders weigh repayment risk. Fair Isaac plans the new FICO version for fall adoption, with no mandate for lenders.
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Bankrate
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Urban Institute
Association of Credit and Collection Professionals
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ikenArt AndFrame
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