FICO Score 9: The New FICO

Recently, in no small part because of the National Association of REALTORS® and the Consumer Financial Protection Bureau, FICO announced big changes to their credit scoring model. While it remains to be seen how much of a quantitative impact the new FICO 9 formula will have, many segments of the population could see increased scores. Those who stand to benefit the most include people with medical collection accounts, repaid collections and young people with “thin files.”

The Federal Reserve Board reports that over 50 percent of all bad debt collections on credit reports are connected with medical bills. Troublingly, a high frequency of medical collection occurs via poor communication between the patient and the hospital or the patient and their insurance company. The reporting of erroneous medical debt was one of the bigger driving forces behind the coming Sept. 1 implementation of FICO 9. Under the new scoring model, the impact of overdue medical bills will be largely negated as medical debt will be differentiated from non medical debt. For borrowers with unpaid medical collections, it is anticipated that scores could jump as much as 25 points per account.

Borrowers with multiple accounts in collection stand to be big benefactors as well. Scores will no longer be penalized for previous collection agency charges once they have been repaid or settled. FICO 9 will ignore all old debts that have zero dollar balances. Those with more than one account in collection could see their scores increase as much as 50 to 75 points.

Young people aged 19 to 29 have had an uphill challenge post 2008 when it comes to opening credit lines. Enormous student loans, an aversion to credit cards, and limited credit histories have compromised many younger Americans’ ability to build their own credit. The new formula takes a more lax approach when assessing those with smaller credit histories, making loans more accessible for Millennials.

Experian, after conducting its own study on FICO 9, concluded that 59 percent of renters’ scores will increase.

While the effect of FICO 9 may not be known for some time, the new formula, especially as it pertains to medical debts, is at minimum, a small victory for consumers. Hopefully, by establishing a tangible way for borrowers to improve their scores, new incentive will be established for many to work with collection agencies in an effort to settle or pay off previous obligations.

This doesn’t mean we are returning to the pre 2008 economic climate, but it’s something.

-Noah Perkins

Noah is an alumnus of UMASS, currently making his home in San Diego. Originally from Boston, he now works as the CMS for VA Home Loan Centers, a VA sponsored lender helping veterans and active duty personnel in their search for affordable housing. To learn more about VA mortgages, visit;



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