Changes To The FICO Score (FICO 9)

Earlier this year we reported that FICO would be releasing the latest version of the FICO score, titled “FICO 9” this is the first major change to the FICO score since the release of FICO 2008 back in early 2009. When this information first came to light, details were sketchy on what was actually changing. The Wall Street Journal yesterday had a piece which contained more information.

[Read: Types of FICO Scores]

Here are the key take aways:

• Less weight will be given to unpaid medical bills that are with a collection agency
• If a bill has been paid or settled with a collection agency, it will no longer affect a consumers FICO score
• FICO 9 will be released to lenders in Fall of this year

The changes to how medical debt is handled should come as no surprise, after this report by the CFPB showed that there wasn’t a correlation between medical debt rates and delinquency rates. VantageScore, which is FICO’s main competitors also do not count paid or settled debts in their algorithm.

This should help consumers who have previously struggled to obtain loans or credit due to medical or paid collections, it should also help them to get more favorable rates.  If these issues are affecting you, you’ll need to exercise some patience as lenders are known for being slow to adopt new FICO scoring algorithms. The majority of mortgage lenders are still using the 2004 models, whilst credit card issuers have only recently switched to the 2008 model.

If the banks do see that delinquency rates stay the same (or are lowered) and they are able to lender to more consumers, adoption of FICO 9 might be quicker than it has been in the past but this remains to be seen.

What are your thoughts on the new changes? If you don’t know your FICO score, here is a list of ways to find out what yours is for free. You can also get it from myFICO, we list the lastest coupon codes for that here.