Credit scoring has evolved over the last three decades and this fall, FICO made one more important change.
Borrowers who have struggled with medical debt and those with a limited credit history might see better FICO numbers in the future. Even if these situations don’t apply to you, understanding how credit scoring is changing can help you better manage your credit over time.
FICO Score 9, rolled out last fall, is described as a more “nuanced” version of the original FICO Score that the leading credit scoring company introduced in 1989.
It is offered by three major credit bureaus — Equifax, Experian and TransUnion. It now bypasses collection agency accounts and weighs medical debt differently than non-medical debt on a person’s credit record.
Borrowers with a median score of 711 whose only negative credit data comes from medical collections will see their credit score go up 25 points under the new system.
As for consumers with limited credit histories — what the industry calls “thin files” — FICO says the new system will better determine the ability of someone in that situation to repay a debt.