Your credit score could be headed higher in the coming weeks. Credit score provider FICO is overhauling the way it calculates credit scores, which could mean higher credit scores — and greater access to mortgage loans — for people across the country. FICO’s credit-scoring model is the most widely used during the mortgage application process.
Under the new way of calculating scores, FICO will reduce how much emphasis is placed on overdue medical bills. It also will ignore accounts that once were late but have since been paid off. FICO said that the changes could boost the median score for consumers whose only major delinquency is an unpaid medical bill by as much as 25 points.
Why the change? More Americans are coping with medical-related debt and more than half of collections on credit reports are linked to medical bills. Recent studies have found that both paid and unpaid medical debts can significantly lower an individual’s credit score, even if they are still an overall good candidate for a loan.