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The New Fico Credit Score Who Will Benefit The Most

FICO is an Acronym for Fair Isaacs Corporation. The Fair Isaacs Corporation is the most often used credit scoring systems. This credit score is used by most lenders to assess the risk involved when lending privately. FICO considers the types of credit incurred, length of credit history, payment history and new credit. FICO scores can be as low as 300 or as high as 850. A score of 650 and above is considered a good credit history. At 620, interest rates are higher and many other obstacles to lending will be incurred.

There are several means by which people improve or impair this rating. Paying bills on time and not incurring large amounts of debt can make the FICO score increase overtime. Not incurring any debt, paying late, or incurring debt and defaulting can seriously impair credit ratings. Over a lifetime an impaired FICO score will cost a consumer many thousands more than if they have a good rating. In addition, bad ratings can be improved with the proper behavior. However, there is some debt that consumers have no control over.

Medical debt is very erratically serviced and disseminated. Therefore, some debt is only unmanageable because of the methods of billing. This is compounded by the methods by which doctors, patients and hospitals deal with the insurance industry. In reaction to this unique phenomenon, a new FICO system has recently been introduced. FICO Score 9 will treat medical debt differently. FICO Score 9 also seeks to correct some other discrepancies. Paid off accounts will trigger the collection agency’s account to be dropped even when the debts are settled rather than completely paid off.

People that have previously been penalized for medical debt will see an approximate rise of 25 points in their scores if the medical debt is the only arrears on the account. By far, the people with this type of debt will benefit most from FICO’s restructuring. Before the Affordable Care Act, medical debt was set to become approximately six percent of the American economy. This debt caused widespread financial ruin for people with or without insurance. In addition, if these people were able to manage without complete financial ruin, their credit scores would often take a decade to recover.

Because of this, any serious illness or injury could ruin the financial stability of many people and families. The FICO 9 score at least helps with the recovery period. Additionally, the Affordable Care Act seeks some remedy for people that have major illnesses and injuries without enough coverage or any coverage at all. No coverage at all is now outlawed by the act. This has gone along way in further reducing this drag on the economy, families and individuals