FICO Score Changes Could Help Millions of Americans

Two months ago, I sat across a table from a woman on the verge of tears. As she clenched her jaw and cast her eyes towards the ground, she disclosed her overwhelming financial situation. An unexpected medical expense depleted her savings and sent her into a downward spiral of financial problems complete with collections agencies pestering her for payment. Even though she paid her other bills on time, avoided consumer debt and worked two jobs to support her family while trying to pay off her medical bills, she felt bankruptcy was the only way out.

Unfortunately, her story is familiar to many other hard-working, responsible Americans around the country. An unexpected medical expense can quickly send the most diligent and responsible people into dire financial straits. Those unpaid debts go to collections, causing a major hit on a credit report and score. Once a person’s score drastically drops, it becomes hard to get a loan to refinance debt without a staggeringly high interest rate.

As of July, about 64.3 million consumers in the U.S. had a medical collection on their credit report, according to data from credit bureau Experian (EXPN), and a hope is on the horizon for them.

FICO (FICO) –- the company behind credit scores -– on Thursday announced an unprecedented change to its scoring model: FICO Score 9 will change the way in which paid collection agency accounts, unpaid medical bills and non-medical bills impact a score.

What Are the Changes?

Read about the changes and why they matter at DailyFinance

Posted in DailyFinance Tagged with: , ,
10 comments on “FICO Score Changes Could Help Millions of Americans
  1. Off to pop over and read the rest…. Our medical bill from the twins’ birth was insane. I had saved thousands for it and still had to pull from savings to get it all taken care of. It’s a mess!

  2. Michelle says:

    This sounds like a great change for those who have medical collections on their credit report. Seven years is a long time to wait for that to disappear.

  3. I’m heading over to read the rest of this, Erin. This new change is encouraging for Americans struggling with unpaid health related bills.
    Addison @ Cashville Skyline recently posted…Holding Myself Accountable: the (Belated) July ReviewMy Profile

    • Broke Millennial says:

      And paying off collections in general. It will still be noted, but at least noted as paid. Anything to help people who ran into a bit of bad luck or didn’t even know a doc was sending a bill to collections. Happens way more often than people think.

  4. John says:

    This is good to hear. As a person’s eligibility for debt refinancing is based on his/her credit score, the change in FICO Score 9 will definitely help in the proper management of one’s financial situation. It is also interesting to note that the company is quantifying the various degrees of a consumer’s payment history. This action will assist individuals having a tough time in their finances, but otherwise responsible in handling pecuniary issues.
    John recently posted…What is cellular respiration?My Profile

    • Broke Millennial says:

      People are quick to judge those with debt in collections, but so many people have a co-pay or something small sent to collections without even knowing their insurance didn’t cover it. (If only insurance would switch to email instead of snail mail!). Hopefully this can help deserving folks.

  5. I do hope these changes will make a difference. It’s so sad when someone’s life changes because they had to receive healthcare to save their life.
    Ryan @ Impersonal Finance recently posted…Loyal3 for stock investingMy Profile

    • Broke Millennial says:

      Or even because they had insurance but there was a mix up with insurance paying (or not paying) and a bill is sent to collections unbeknownst to someone! Really rocks your credit score.

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