New FICO Scoring system Discounts/Disregards Medical Debt

New FICO Scoring System – Lenders will be able to better asses risk by discounting or not including medical debt

New Fico Credit System

New FICO Scoring System – FICO (FICO.N), one of the major personal credit score providers, is deciding to either discount or or not include medical debt altogether when calculating credit scores. Lenders will be able to asses risk more accurately, and many borrowers will have their credit record boosted. FICO reported that overdue medical payments which have already been settled won’t be considered when determining credit risk.

One of the main reasons behind this move was the reality that most consumers who accumulate medical debt do so for different reasons than those with credit card debt or home loans. For example, sometimes consumers don’t know how much coverage they are receiving for procedures or medications, so they aren’t aware they owe money. When a debt collector calls, the consumer may be able to pay off the debt, but their credit score will still be negatively affected.

This issue will be dealt with by the new FICO score changes weighing medical debt much less heavily than other types of debt.

The new FICO scoring system will be able to identify risk more effectively and help sub-prime lenders minimize the risk of doing business with these types of borrowers.

It is still unknown what others impacts this will have on lenders; they have to actually use the score before it can provide any value for customers.

The new FICO changes are set to roll out this fall through U.S. credit reporting agencies.

Ultimately, this is one small step in the right direction for major creditors, but our healthcare and credit systems still need a lot of reform in order to bail our country out of the massive debt we’ve accumulated. It would be great if the U.S. student loan debt, which has now exceeded credit card debt at $1.2 trillion, were treated similarly when calculating credit risk.