For Immediate Release: November 17th 2014
There is great news for consumers with less than perfect credit scores. FICO, which is abbreviated for Fair Isaac Corporation, has announced a new scoring model that will help individuals with below average credit see an increase in their credit scores.
The FICO score was created in 1989 and has since adapted updated versions over time. The National banking system is utilizing the FCIO 8 scoring model although FICO 9 will be announced soon. The Fico 8 system is better than the previous versions because with the older versions when you had a late payment, it had a higher negative impact on your score. Another advantage to the current model is that the FCIO 8 scoring model ignores collection claims less than $100 and reduces the impact of any authorized user accounts.
The newly not announced FICO system a/k/a FICO 9 provides the following biggest benefits to consumers:
- Discounts the affect or has NO affect for ALL medical collections
- Paid collection accounts will no longer remain as a negative to your FICO score
According to Jason Walowitz with the non-profit consumer advocacy group, United Financial Counselors (www.UnitedCounselors.org), he states that “the new scoring model will encourage consumers to start working with collection agencies to pay down old or recent collection accounts.” According to the Federal Reserve, more than half of all bad-debt collections on credit reports are associated with medical bills. “Many consumers feel that after the account has been reported to the credit bureaus’ regardless if they pay it or not, the damage is done” says Walowitz. “With the new scoring model, the damage of the initial collection being reported will be completely diminished by simply paying the debt off in its entirety.” For those with solely medical collections being reported to their credit report, these consumers can expect to see an increase by 25 points on a scale of 300 to 850 according to FICO. Jim Wehmann, executive vice president for Scores at FICO says “By applying innovative predictive modeling techniques on recent data to capture consumer credit behavior, FICO Score 9 will extend FICO’s leadership in providing the credit score that most accurately and fairly defines U.S. consumer credit risk.” (FICO press release August 7th 2014 FICO 9)
The new scoring model is planned to roll out in early 2015, but do not expect your bank or your creditors to start adapting the program just yet. It took about 6 years for the majority of lenders to adapt the FICO 8 scoring model. “The main reason for lenders to slowly adapt scoring models is cost as well as the saying; if it’s not broken don’t fix it. To start adapting a new scoring model is like fixing the leaking sink in your kitchen and paying $10,000 in labor to accomplish it. It is not a necessary expense until other factors come into play that requires the lenders to adjust their systems.” Says Walowitz.
Overall the new FICO system seems to be welcomed by the banking industry and consumers nationwide. The way risk is calculated must also adapt just like the technology industry must adapt to needs and wants of consumers.
To learn more on how you can improve your credit score contact United Financial Counselors, located in Hollywood FL & Bridgeport CT. Ph# 954-380-8517 or visit: www.UnitedCounselors.org