Credit Scoring of Medical Debts: FICO-9

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Credit Scoring of Medical Debts: FICO-9

Postby Hello MFC-Robert » Sat Jan 31, 2015 9:13 pm

You’ve probably read the latest news that Fair Isaac Corporation (aka “FICO”) issued a new version of its popular credit scoring model, FICO Score 9 which will help millions of Americans who have medical debts on their credit reports. FICO’s website explains that the new model will consider “paid collection agency accounts” of medical debts in “a more nuanced way.”

About FICO-9, FICO.com states: “The median FICO Score for consumers whose only major negative references are medical collections will increase by 25 points.” Looking at the many articles on the Worldwide Web, adding 25 points to a credit score is almost like the Holy Grail for consumers who want to reduce their cost of credit and have access to better credit terms. The Washington Post’s Wonkblog even had a posting titled, “Raise your credit score without lifting a finger.” (By Danielle Douglas-Gabriel, 8/11/2014)

A recent “government report shows that almost 20% of US consumers – nearly 43 million people – have unpaid medical debts that have gone into collection.” (Source: The Guardian, Author Jana Kasperkevic, 12/11/2014.)

Unfortunately, a new version of the FICO score is not the same as the latest update of Microsoft Windows, in which as many users as possible receive a copy and start using it immediately in place of older versions. The Wonkblog posting on 8/11/2014 explains, “ ‘It takes years for lenders to gravitate from older versions to newer versions,’ said John Ulzheimer.”

When will private lenders use FICO-9? We hope that will be soon, but the real impact will be when “Fannie Mae, Freddie Mac and the FHA (which buy 90% of U.S. home loans)” adopt FICO-9. (Source: http://www.housingwire.com/blogs, by Kristin Messerli, 9/3/2014.) As of 2014, Fannie and Freddie still use FICO Score-4, which was introduced in 2004 and there appears to be little indication of updating the version, according to http://www.ficoforums.myfico.com.

For perspective, imagine if Microsoft announced Windows 10, when most computers were still running Windows XP, which Microsoft released in 2001 then moved to Windows Vista in 2007, according to Wikipedia. Unquestionably, many personal computers still operate on Windows XP, perhaps with good reason such as the computer lacks enough memory for newer versions of Windows or perhaps it does not have a touch screen, so it does not need Windows 8 or higher. However, it would be shocking to see almost all new and recent computers at large American financial corporations operating under XP.

Reading tea leaves, it may be a decade or more before FICO-9 is used by the mortgage industry giants, leaving consumers to wonder what they should do about the paid medical debt collection accounts on their credit reports. Accounts on a credit report must be reported accurately, so if you determine there are errors on your credit report, dispute the errors directly with the credit reporting agencies, preferably in writing with written proof supporting the dispute. I have free sample letters on my website, http://www.stopcollectionharassment.com and other sample letters are posted here at http://www.myfaircredit.com/forum. If that does not resolve the problem, consult one of the lawyers listed on this website in your state to determine if any credit reporting or debt collection laws have been violated and what can be done about it.
Robert Stempler, Attorney at Law
California State Bar # 160299
Email: Robert@StopCollectionHarassment.com
Telephone: (805) 246-2300
_ © 2015 Consumer Law Office of Robert Stempler, APC

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