Of course the credit company has a goal of assessing and predicting risk of consumer default for future lenders, and unpaid or overdue medical bills have little real-life correlation to default on other consumer debts. FICO Score 9 will treat them differently, so a consumer’s score won’t be affected as negatively just from medical bills in collections – better representing the accurate risk.
How much will these changes help or hurt a consumer’s score? If someone had a clean credit profile except for one major medical debt in collections, their score would increase by an estimated 25 points once FICO Score 9 is implemented. The changes will be widespread, as FICO is the preeminent credit scoring model in the U.S. 90% of consumer lending decisions take FICO scores into account, with 25 of the largest credit card companies, 25 of the largest auto lenders, and tens of thousands of other businesses looking to them for consumer risk assessment and federal compliance.
The downside? It will take a while for FICO Score 9 to be implemented – maybe even a couple years, as software and systems are updated. Also, Fannie Mae and Freddie Mac haven’t adopted this new scoring model as of yet, so the scoring changes won’t benefit consumer lending.
If you have significant medical bills, accounts in collections, or any questions about FICO Score 9 and your credit score, feel free to contact us for a no-risk consultation. It could save you big money!