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What FICO Credit Score Changes Might Mean For You

The move could increase some credit scores by 25 points and make it easier for consumers to obtain loans.

By Evan Thomas | August 8, 2014

Credit tracking agency FICO could take some of the sting out of medical expenses.

The group announced plans to lessen the impact medical debt has on its credit reporting — outstanding medical bills will no longer lower credit scores.

"The move will make it easier for U.S. consumers to borrow money and banks to lend. It could be most beneficial for people applying for mortgage loans." (Video via CNBC)

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FICO even assigned a number to the improvement — as of 2012, the average FICO score was 689. If medical debt lowered your credit score, the change could increase it by 25 points.

FICO will also stop counting debts that went to collection and were paid off in full — a category which, until now, negatively impacted credit scores.

The Wall Street Journal characterizes it as a net benefit for consumers, who can now more easily get loans and will enjoy expanded loan eligibility.

But while it's all good for consumers, other members of the credit rating industry are dismissing any improvements.

VantageScore is a competing credit rating system, run as a team effort by credit agencies Experian, Equifax and TransUnion.

HousingWire quotes the president of VantageScore, who isn't impressed. He says, "Changes to the new FICO model apparently try to remedy many lender and consumer challenges already addressed by VantageScore."

That's not likely to bother FICO, which pointed out in its announcement a full 90 percent of consumer lending is based on its scores. FICO plans to implement the new system this fall.

This video includes images from Getty Images.

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