NEWS ABOUT CREDIT SCORE CHANGES

        The creator of one of the most widely used and influential credit scores, FICO, said that the latest version of its score would no longer weigh medical debts — which account for about half of all unpaid collections on consumers’ credit reports — as heavily as it did in previous iterations. The newer FICO scores, available this fall, will also ignore any overdue payments that have already been made. Previously, the scores factored paid and unpaid collections equally, though it ignored amounts under $100. FICO credit scores, which have become consumers’ financial passport to just about everything from rental apartments to most loans such as mortgages, are based on the information in an individual’s credit reports, which are generated by the three major credit bureaus: Equifax, Experian and TransUnion. The scores are based on a 300- to 850-point scale. Because of the new scoring model, individuals with a median score of 711 — and an otherwise clean credit history, except for unpaid medical debts — may see their FICO score rise by 25 points. As a result, many consumers may qualify for more attractive interest rates on various loans, potentially resulting in thousands of dollars in savings. “It probably doesn’t mean the difference between an approval and a denial, but it can mean the difference in a more advantageous rate,” said John Ulzheimer, a credit expert at Credit Sesame, a consumer credit website, and a former FICO employee. But consumers whose credit files are tarnished only by unpaid medical debts that went to collection agencies — but were ultimately settled or paid — are likely to see a much greater increase in their scores. “That is when you could expect to see your score go through the roof,” said Mr. Ulzheimer.   Source: NY Times  

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