TexasLending.com – What FICO Score Changes Might Mean for Home Buyers

TexasLending.comAccording to the team at TexasLending.com, you may physically recover after a hospital stay, but medical emergencies can really harm your financial health. A 2012 study found 75 million Americans had trouble paying their medical bills, damaging their credit scores. In 2014, the credit tracking agency announced a new plan (FICO Score 9) to lessen the impact medical debt has on its credit scoring. Outstanding medical bills no longer lower a credit score.  TexasLending.com says the move makes it easier for consumers to borrow money and banks to lend. FICO even assigned a new number to the improvement. As of 2012 the FICO score was 689. Fico Score 9 could increase this score by 25 points, bringing it to 714. But why treat medical debt differently?

First, says TexasLending.com, medical debt is unpredictable, often causing short term problems, even for financially responsible people. Second, the consumer protection collection bureau says billing problems and confusion about what’s covered by insurance often mean that  patients don’t know they owe money until the collection agency holds the debt and the credit score is impacted, adds TexasLending.com.

FICO also stopped counting debts that went to collection and were paid off in full, a category which until recently negatively impacted credit scores. TexasLending.com characterizes this as a net benefit for consumers who can more easily get loans and enjoy expanded loan eligibility.

However, while FICO score 9 holds a promise of more credit at lower rates on some loans, it won’t improve a person’s chance of getting a mortgage, says TexasLending.com. An earlier version of FICO known as the Fico Classic is one of the many factors that banks use in assessing a client’s credit worthiness, meaning that a higher score won’t translate into a total financial victory.

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