Fair Isaac Corporation is releasing a new update to its widely-used FICO scoring model.
The newer version is said to be “more predictive” and easier on customers with limited credit history.
One of the biggest changes is more lenient on medical collection items.
In the newest FICO version, a model named FICO Score 9, medical accounts which have gone into collection will not affect consumer credit scores with nearly the same impact as non-medical collection items.
Consumers whose only negative accounts are medical collections should expect their FICO scores to rise 25 points.
Another major change is linked to customers with limited credit history.
In the new FICO Score 9 scoring model, a broader set of variables will be used to determine the borrower’s likelihood of default as compared to prior versions of the FICO model. This change is expected to help first-time home buyers with a history on of-time payments; and other borrowers who carry few monthly debts.
Another great addition is how the FICO Score 9 scoring model will change the way that credit bureaus look at paid collection items.
In prior credit scoring models, paying an item in collection has been known to harm a person’s credit score by “bringing the account current”. The new algorithm is expected to bypass such items, which should give a boost to borrower credit scores.
The new scoring model will help boast consumers’ credit and will benefit applicants who are applying for mortgages. However, it is somewhat unclear if mortgage lenders will adapt the new scoring system to their underwriting repetroire. Stay tuned for more information regarding the updated FICO Score 9 model, or call us for more information.
