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New FICO 9 Model Changes and What It Means for Consumers

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Published: August 18, 2014

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A few days ago, FICO (Fair Isaac Corporation), which is the most prominent company that calculates our credit scores, announced that they would exclude paid off debts out of their algorithm. A few months ago, they also announced that they would lower the weight of medical debt on one's credit report, although it would still be counted.

Medical Debts

Over 50% of consumers with collections on their credit file have a medical delinquency. The new scoring model will reduce the importance of such delinquencies on your credit report. FICO estimates that as a result, an average score of people who don't have other debts, will rise by about 25 points.

Paid Off Balances

In another FICO announcement, the paid off debts will be completely taken out of the equation. As of right now, your credit score is equally penalized whether or not you have paid off your debt, which makes no sense and don't give consumers any incentives to settle the delinquency (about 9% of all people with debt on their credit report have paid it off). According to the new FICO model, their score is about to jump considerably.

FICO has been steadily pro-consumer for the last ten years. Their current model FICO 08 already excludes small debts under $100, paid or unpaid, which in the past had carried the same weight as debts that amounted to thousands of dollars. In the recent years, FICO has been urging credit card companies to provide their customers with free credit score, which resulted in contracts with Barclaycard®, U.S. Bank®, and Discover®. Customers who carry those credit cards have free monthly access to their free FICO credit scores.

Will Existing Bank Customers Get Lower Finance Rate for Loans and Mortgages?

I wouldn't expect your bank to offer you a lower rate pro-actively just because your score has increased by a few dozen points. What you could and should do instead, is to shop around and see what other banking institutions could offer you. Then you can go back to your bank and see if they are willing to match or beat that offer.

When Is It Going to Happen?

Some experts claim that the transition to the new scoring model will take about 18-24 months. I believe it is overly optimistic. It takes a great deal of time and money to implement big changes in FICO scoring models. The current FICO 8 system, for example, was ready by 2008 (hence the name) but most banks have fully integrated it only 1-2 years ago. In any case, it is not going to happen tomorrow, but it is coming.

It Is Not All Good

FICO also announced that attaching one's trade line to someone else's credit report will not count in your favor as much as it used to. In simple terms, adding a person with bad or no credit history to someone else's credit report used to be a great way to raise one's score. So-called credit repair agencies know that, and they have been using this trick for years. With the implementation of the new FICO 9 scoring model, this technique won't be nearly as effective.

All in all, the changes FICO has made to their formula are truly revolutionary, and consumer friendly. They don't resolve every issue, but they are bound to bring into the fold millions of people who are now eligible only for subpar loans and "bad credit" credit cards.

This is a post by Andy Shuman, a credit and travel expert who blogs at He writes and blogs during and between trips that he enjoys free of charge mostly due to creative use of credit card offers. He believes that credit cards are much more than just a convenient way to pay for a purchase, and that the benefits of responsible credit habits can go far beyond getting the best rates for loans and mortgages.

Andy is the author of bestselling books from Lazy Traveler Handbook Series available on Amazon. When he's not traveling, he lives with his beautiful wife and daughter in Brooklyn, NY.

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