On Friday August 8th Fair Isaac Company announced that their updated FICO 9 scoring system will FINALLY be doing some good for consumers. This is the first change to their scoring system in about 6 years.
The 2 specific areas that this will help out on are:
- Medical collection reporting
- Limited/Thin trade-line borrowers
When it comes to medical billing I’ve noticed over the years that once a bill from a hospital hits 31 days old… its immediately sold to a collection company. Confusion about the amount covered by insurance companies related to medications / procedures sometimes means people do not realize they owe money.
Fair Isaac Corp said last week that overdue medical payments that have already been settled will be ignored while calculating credit risk. It will also discount overdue medical payments yet to be made under the new scoring model. This will help improve the median FICO score for consumers who mainly have unpaid medical debts by what is believed to be about 25 points.
Regarding Thin credit files… FICO 9 will help represent consumers’ repayment behavior in degrees of risk. For example, instead of classifying a consumer as someone who paid or didn’t pay her bills in absolute terms... the various degrees of the consumer’s payment history have been quantified. The end result is a score that a LENDER will be able to assess on these thin files and easier approve.
WHY IS THIS IMPORTANT FOR YOU TO KNOW?
Within the industry… a 25 point jump in your credit score could mean:
- An answer of YES… instead of a NO.
- Going with a conventional loan instead of an FHA loan (Lower payments to the tune of about $40 to $200/month.
- A lower interest rate
- A lower MI (mortgage insurance) factor
I keep on top of these little things so you don’t have to. iLJan