Credit scoring is an imperfect science. In essence, it’s about estimating how likely someone is to pay back money borrowed based on their history of doing so in the past. Given a number of situational factors, it’s important though the the industry reexamine its standards every now and then. Well, there’s some good news: apparently the industry, aware of the tremendous medical costs faced by many Americans, has decided to put less emphasis on unpaid medical bills in scoring credit starting this fall.
“People who had a good credit history, where an unpaid medical debt was their only negative, they were still good, reliable customers,” Anthony Sprauve, a spokesman for FICO, told The Washington Post. “They’re not going to default; they’re going to pay their bills. The unpaid medical collections is an anomaly.”
Fair Isaac (FICO), which produces the FICO score, will no longer include failures to pay bills when calculating a score if the issue has since been resolved. The tabulation also will take unpaid medical bills less into account, according to the Journal.
These changes — which are meant to stimulate consumer lending — are the result of discussions between Fair Isaac, the Consumer Financial Protection Bureau and lenders, the Journal reported. Out of the 106.5 million Americans with a payment collection on their report, 9.4 million had no current balance, which means their credit scores will be bolstered by the new system, according to the Journal. Read more.
What do you think of the upcoming change? Are you going to celebrate by checking your credit score?