The new method of FICO scoring may be good news for some residents of New Jersey as well as nationwide. The goal is to omit any medical debt presently taken into consideration and help the consumers boost their credit ratings. It will also ease the process of assessment by the banks of one’s creditworthiness when applying for a loan.
Under the new scoring model, all overdue medical payments or those who have already been settled will not be included in overall scoring. As a result, the credit rating may be increased by as much as 25 points. The new system will make it easier to identify risky borrowers and help lenders to make decisions quicker when deciding to approve a loan.
As the system is new, many lenders may find the process confusing. This new concept is still largely unfamiliar to many and will become effective only if the lending institutions will actually use it in their pre-approval process. Many individuals may not be aware that they have a medical debt until they begin receiving calls from the collection agencies. By then, their credit score is already compromised and weighs heavily when trying to apply for the loan. This confusion often occurs when individuals are not certain about their insurance coverage and may not be aware that they have any financial obligations.
Removing any medical debt from the credit history will aid consumers when trying to obtain a loan. Their creditworthiness may be better assessed without negative reports about any medical debt reported to the credit bureaus. In order to deal with medical debt, consumers may want to become better educated and familiarize themselves with the process. An attorney may be able to review all necessary documents in detail and suggest appropriate debt relief alternatives.
Source: Reuters, “FICO’s new scoring model to help lenders better assess risk“, Amrutha Gayathri and Emily Stephenson, August 08, 2014