FICO, the most widely used credit scoring company in the country, modified their model in 2014 (FICO 9) but few people are aware of how these adjustments affect them personally, or even that there have been changes at all. A few shifts in the scoring algorithm can make a big difference in your credit score, and consequently the interest rate you may be charged on your home loan – the higher your score the lower your mortgage interest rate. By and large, mortgage companies seem to be applauding the modifications. The informative video below outlines a few of the changes and how your credit score might improve because of them.
For your convenience, there is a transcript of this video at the bottom of the page.
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Transcript: How Fico 9 Changes Could Impact Credit Scores
Welcome to Today’s Home Update, I’m Amanda.
FICO 9 was created in an effort to boost lending without increasing risk for
lenders.
With FICO’s updated scoring system beginning to gradually rollout,
its important for consumers to continue to practice good credit habits.
According to the Better Business Bureau FICO 9 will result in these
three significant changes, which may positively impact your credit score.
Number 1 – A lack of credit history will no longer be as big of a factor in
determining lending eligibility. FICO 9’s new algorithm assesses loan risk
instead of history eliminating challenges for young adults or those with little
to no credit.
Number 2 – medical debts will now hold less weight. Incurring debt
from a medical circumstance is often unavoidable. Once FICO 9 takes hold,
experts estimate that those with medical debt and an otherwise good
credit history, will see a 25-point increase in their score.
And number 3 – collections at will not be as heavily evaluated. Debts
paid to a collections agency will have much less of an impact
thanks to a forgiveness policy, that could result in the addition of 100 points
or more to your score.
Thanks for watching Today’s Home Update, see you next time.
