FICO, formerly known as Fair Isaac Corp, has just released a new model for credit scores. On Thursday, the company announced that the latest version will no longer weigh medical debts as a part of the score. It will also discount overdue medical payments yet to be made.
FICO scores are used in determining a person’s financial responsibility. The 3 major credit bureaus (Experian, Equifax, and TransUnion) issue a credit score to lenders who will use that score to determine whether you will be a risky borrower. So, with a bad credit score, you may get turned away from getting loans, renting properties, and even getting certain jobs. In the past, if you had large medical debts, your score could be ruined. However, with the new model, many consumers may be helped. FICO explained that the new scoring system does a better job of identifying risky borrowers, because consumers end up with medical debt for different reasons than they end up with other types of debt.
Although the new model is set to launch in fall, the impact on lenders remains uncertain. In order for this new version to help consumers, subprime lenders will have to start using that score.
Source: New York Times
