FICO is one of the most widely used credit ratings in America, in fact FICO reports that 90% of U.S. lenders use their formula. Recently FICO changed the way they calculate credit scores. Due to this change many will see a boost in their credit ratings. But are you one who will benefit?

Medical Debt

A large medical bill can come on suddenly due to a  traumatic event, lack of insurance coverage, or miscommunication between provider and insurance company. In fact, a majority of bad debt credit collections on credit reports are associated with medical bills. Unpaid medical debt that is sent to collections agencies will still affect one’s credit score, however, it will have a much lower impact on that score. The median score of individuals with major unpaid medical debt is likely to increase by 25. Although this type of increase may not seem like a lot, it will allow improved access to better loan terms


If you have past debt that is now paid off (zero dollar balance), you will no longer be dinged. In fact these type of debts will have no effect on your score. This can also be viewed as an incentive to consumers working with debt collection agencies to pay off balances. Once those balances are paid off consumers may see a huge jump in their score.  However bad debt will be noted on a consumers report for seven years, just not reflected in the score.

High vs. Low Scores

Credit scores are a way to measure how likely the consumer is to pay back the loan. The higher the score, the larger the loan, better terms and lower interest rates. In fact, higher credit scores will allow for better credit card offers. On the flip side, those with poor credit scores may be unable to secure loans. However, these FICO changes will affect applications for credit cards, auto loans, personal loans

, students loans and mortgages.

When Will the Changes Hit?

Although the new FICO score will be available starting this fall, it will take a significant amount of time for the lenders to catch up and adopt this new scoring system. In addition, switching systems can be costly for lenders. Regardless, this is a welcome change for consumers. With credit being such a vital part in purchasing power, these improvements will assist many.