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The Method FICO Uses to Calculate Your Credit Score is Changing. Will Your Credit Score be Affected?

Credit scoring

FICO has just announced a change to their FICO credit scoring algorithm. The changes come as the company works to improve its ability to predict whether or not you might be a good credit risk. The new formula de-emphasizes medical debt that has been taken into collections and completely ignores any debt that has gone to collections, but has later been paid off.


The new calculations will benefit people that have struggled with their debt in the past, but have worked hard to make their payments current again. The new FICO score gives recognition to people that do the right thing and pay their debt.

The new credit scoring method has been named FICO 9 and takes into account research that shows that medical debt has a smaller impact on a consumer’s repayment behavior than other debt, like credit cards. FICO reports that a person with a credit score of 711, has medical debt in collections, and an otherwise good credit history could see their score rise as much as 25 points.

 What does the FICO 9 mean to you? A 25 point rise in your credit score might not make the difference between being approved for a loan and not being approved, but the higher score will help to get you better interest rates and save you a lot of money in the long run. For those people who have paid off all of the debt that had been taken to collections, seeing that blemish removed from their credit history will have a much larger impact.

When could you expect to see changes in your credit score? Maybe not as soon as you would like. The new FICO 9 is just the latest credit scoring system to be released and has a lot of competition in the market, including the previous FICO 8.Creditors can choose any credit scoring method they prefer, and the adoption of the FICO 9 system could take some time. The news from FICO will be welcomed by many consumers. However, you might not see changes in the credit score your creditor uses in the near future.

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