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FICO Changes May Be A Flop

After much anticipation of the new FICO scoring system, it seems that it's release may not be as beneficial as once hoped. While those bogged down by medical debt are still likely to see some improvement in their score, the benefits may stop short. Change Matters The FICO 9 scoring system was launched earlier this 

After much anticipation of the new FICO scoring system, it seems that it's release may not be as beneficial as once hoped. While those bogged down by medical debt are still likely to see some improvement in their score, the benefits may stop short.

Change Matters

The FICO 9 scoring system was launched earlier this month and is said to bring some much needed benefits to consumers, namely those being negatively impacted by outstanding medical debts. The new scoring system is going to make two important changes, (1) more or less ignore medical debt balances when calculating scores and (2) lessen the impact of old, paid collection accounts. What this means for some is an increase in their score, or at least minimal impact in damage for future score calculations for either of these two occurrences on a report. However, consumers are now being warned that the benefits of the new system could limited.

Scoring Models Vary

Financial experts are cautioning consumers not to get overly excited about the scoring changes. Most consumers are not aware that banks and lenders often rely on other scoring systems besides the one the credit reporting bureaus are currently going by, meaning the score you see isn't necessarily the score the lender sees. Most mortgage lenders use the FICO 4 scoring model, one that is far more critical of the exact marks the FICO 9 is trying to eliminate. In order to be conservative in lending, many banks refuse to adopt any scoring system that ignores balances regardless of their origination or current status. This means that consumers in the market for a new home in the coming month and into the new year should be cautious when evaluating their credit scores and take the steps necessary to position them for loan approval.

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