What Is This Change That Will Help My Credit Score?

Actually, Fair Isaac, the company that gives us FICO, the   search

main credit report scoring system, announced TWO changes in how it reports debt.

Medical Debt

For the first time, FICO will categorize separately medical debt

from non-medical collection accounts.

There have always been good reasons for this.

How many of us intentionally incur medical debt, like, say, we apply for a credit card or car loan?


No, medical debt comes our way unexpectedly.

And, lots of us, me included, think that our insurance covers medical debt.

It is frequently months, many months, AFTER treatment that we start getting bills from who knows who for lab tests or procedure room rental, or, whatever.

What creditors want to know, when they look at your credit score, is, are you going to pay them back if they lend you money?

That is it, that is all they are using FICO for.

So, is having a late medical bill really something that shows whether you will make your car payment on time?

FICO Score 9 is the latest model, and makes this change on medical bills.

Of course, there will be no change unless creditors use the new version.

They are free to buy whatever they want, so if they think the old version is better, that is the model they will use.

Paid Collection Accounts

One of the frustrations my clients have is when I tell them that paying the collection agency will not clear up that debt on their credit report; it will still show as a late pay.

If an account goes to collection, and you pay it, isn’t that what you were supposed to do?

So why should you get the same bad tradeline, as credit report entries are called, for a late account that you did pay, as for one on which you still owe something?

This change will help creditors, as folks are more likely to settle with a collection agency if it helps their credit score.

(image credit FICO)

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