Why Your Credit Score Might Be Going Up

Change in way they're calculated will be more forgiving of medical debt

By Jenn Gidman,  Newser Staff

Posted Aug 8, 2014 1:30 PM CDT

(Newser) – A modification to how one of the most common credit scores is calculated will mean better credit ratings for many Americans, reports the Wall Street Journal. Fair Isaac Corp. said yesterday that it won't place as much emphasis on medical debt when calculating consumers' FICO scores and will turn a blind eye to other debts that have been paid or settled through a collection agency. The new scoring system, which will be in place this fall, follows negotiations with the Consumer Financial Protection Bureau on ways to boost consumer lending.

According to a Commonwealth Fund report cited in the Journal, 41% of US adults had a hard time coming up with funds to pay medical bills in 2012. Those who only have medical debt on their credit report could see an instant 25-point jump in their FICO score, according to CNN. The changes also mean that people who pay off their debts in collections won't be stuck with a seven-year black mark on their report like they have been. VantageScore—which manages the popular scoring model created by the Experian, TransUnion, and Equifax credit bureaus—says FICO's move is "a competitive response" to similar score-boosting changes it made last year, notes Housing Wire.

FICO credit scores are getting an overhaul.
FICO credit scores are getting an overhaul.   (Shutterstock)
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