FICO, the nation’s most popular credit-scoring system, announced it is tweaking some of the criteria used in coming up with consumers’ scores, which could help consumers save more money in qualifying for mortgages and other types of loans.
The changes include reducing the toll that overdue medical bills can take on credit scores, as well as removing other past penalties from consumers who have paid off debts that had been assigned to collection agencies. A consumer whose only major delinquency comes from an unpaid medical bill could see their credit score rise by 25 points due to the changes.
The changes come after a recent Consumer Financial Protection Bureau study, which found that both paid and unpaid medical debts were unfairly penalizing consumers’ credit ratings. An estimated 64 million Americans have a medical collection item on their credit reports, according to Nick Clements of Magnify Money, a personal finance site.
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