FICO Credit Score Changes

Earlier this month it was announced that the FICO credit scoring system would be rolling out some changes. These new changes were expected to bring some good news to many consumers, so what’s the result so far?

Mad About Medical Debt

Under the old FICO scoring system, medical debt balances weighed heavier than expected in terms of their effect on a score. Even if the account is current and not delinquent, outstanding medical debt balances were dragging down scores of millions of consumers. Even old debts that have since been paid off, but were perhaps once in collection, were also contributing to the less than satisfactory score of many.

Under the new FICO 9 scoring system, medical debts and older resolved accounts are not expected to have as much value in their weighting of the score’s calculation. For the millions of Americans struggling to repay their medical debts each month and stay current, this comes as good news. These same consumers should see an increase in their scores in the coming weeks. However, the benefits may just stop there.

Lenders Pick And Choose

The news of these FICO scoring changes excited many, as it was hoped the increase in credit score could help with loan qualification. In reality, these new scoring system changes aren’t likely to be of any benefit for consumers when it comes to secured loans like a mortgage. Why? Because lenders aren’t going to adopt a scoring system that would devalue the possible red flags of risky borrowing. In fact, most mortgage lenders these days still use a very old, and very conservative scoring system, FICO 4. The bottom line is that consumers will be able to benefit to a degree from these scoring system changes, but that benefit isn’t likely to be the difference in qualifying for a house, all other things equal.