How FICO 9 May Increase Credit Scores
Updated: Jan 28, 2021
How medical debt and other collection items are tallied in a credit score is changing, potentially increasing the credit scores of millions of people.
Called the FICO 9, the new credit score changes how medical collections are treated from non-medical changes, such as credit cards. A medical debt will now damage a credit score less than paying a credit card bill on time, for example.
FICO 9 came out in 2014, but the improved credit scores could just now be coming to fruition for many consumers because it can take a few years for banks and other lenders to implement the new system.
The new FICO 9 score should give responsible borrowers better access to credit and lower rates on existing credit once the changes are accepted by the industry.
Part of the thinking behind the changes is that for many people facing medical debt collections, it isn’t something they have a lot of control over. People get sick or are in an accident and can’t control how high their medical bills are, and may not even know that their medical debt is in collections.
More than 64 million Americans have some kind of medical collection record on their credit reports, according to Experian, a credit bureau. Almost all medical debts are reported to credit bureaus by collection agencies.
The FICO score is the most widely used credit score in the country, and is used by companies selling mortgages, credit cards, personal loans and more.
Another change with FICO 9 is that older collection items will have less impact on a credit score. Other types of debt that are sold to a collection agency—such as an unpaid utility bill or phone bill, school loan or rent—can still be reported to a credit bureau, but older collections will have less impact on a credit score. If the collection item is paid back, the score will improve.
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