FICO Credit Score Changes are Bringing More Fairness to Lending Decisions
What is FICO?
FICO credit scores, which have become consumers’ financial passport to just about everything from rental apartments to most loans, are based on the information in an individual’s credit reports, which are generated by the three major credit bureaus: Equifax, Experian and TransUnion. The scores are based on a 300- to 850-point scale. A good credit score furthers your borrowing power and financial opportunities.
Below are the pros and cons on how the new FICO 9 will impact your credit score.
FICO 9 Pros:
- Non Traditional Credit
Paying your rent on time will finally mean something to the credit bureaus. In the past this non-traditional credit would only negatively impact your score if you were a less than timely tenant. Now you can benefit from having a good rental history. This consideration will allow more consumers the opportunity to build a positive credit history.
- All Debt is Not Created Equal
Medical debt that is reported on your report will not have such a heavy impact as it once did. Millions of Americans have medical collections on their credit report. Currently medical debt contributes to about half of the negatives on credit reports.
- Settled Debts
Collections that have a zero balance will now be ignored. In the past they would remain on your credit report for seven years. With this change once there is a zero balance on a collection account it will not be factored into your credit score.
FICO 9 Cons:
- Lender Discretion
Lenders are privileged to decide when they use the new FICO 9 score. As history has shown lenders like to test the waters with the software before simply flicking the switch. This will likely be seen gradually progressing into effect.
- Unpaid Debts
“People with unpaid debts on their record that aren’t related to health care would see their scores fall, making it harder for them to get a personal loan or credit card, or raising the interest rates they’ll have to pay”- FICO
How does this benefit our PCS Clients?
This new change helps PCS Debt Relief clients credit score when an account is settled and paid off. The collection accounts with a a zero balance will now be ignored and will not factor into your credit score. Yes, lenders will be able to see that the account was in a collection status however, once a zero balance is achieved there is no impact on your FiCO score. So with this said, PCS clients can start seeing a rise in their score by simply settling their debts with us.
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