Under the new system, FICO will ignore paid collection accounts and place less emphasis on medical bills when calculating scores. Those consumers whose only major black marks are unpaid medical bills could see their credit scores raise by as much as 25 points, according to the company.
The decision was hailed by National Association of Realtors President Steve Brown, who said it will increase consumer access to home ownership.
“Realtors welcome today's announcement from Fair Isaac Corp., or FICO, that it will no longer penalize borrowers for certain debt-collection activities when calculating credit scores,” Brown said. “This move will ultimately make a real difference in the lives of millions of Americans, who have been shut out of the housing market or forced to pay higher mortgage interest rates
because of flawed credit scores. Since the housing crash, overly restrictive lending has been the greatest obstacle to homeownership. NAR will continue to support efforts to broaden access to credit for qualified homebuyers.”
The new FICO scores will be available to lenders in the fall, according to the company.
In a move industry pros say will expand access to home ownership, FICO announced today that it is revamping the way it calculates credit scores.