FICO recently announced changes to how they will determine your credit score. These changes will help many borrowers on the cusp of eligibility, as they will now exclude  medical bills in collection and paid or satisfied collections when determining your score. What this means is that tens of millions of Americans will see their credit scores surge when the new scoring model hits later this year.

“The median FICO score for consumers whose only major derogatory references are unpaid medical debts is expected to increase by 25 points,” according to FICO’s release on the new model. So if you have an unpaid medical bill, expect to see a significant improvement in your score.

Additionally, FICO will now change the way it judges people with limited credit experience. This is going to be done in an effort to not penalize those who are younger or who generally prefer to pay cash.

In my years, I like to think I have seen it all, or at least close to it, but nothing is as difficult for me as when I have to give the bad news that a client is unable to buy their dream home because of credit issues. Especially when the client doesn’t even know there are issues. With medical bills in particular, an unpaid claim may never make it to your doorstep, but that won’t stop a collection agency from hitting your credit.

So if you were on the fence about buying a house or trying your luck again after being turned down, now is the time to contact a qualified loan officer who can help you determine the best time to start the application process.

If you have any questions about the changes to FICO or about getting prequalified to buy a home, please contact me. If you have anything to add about the changes to the FICO scoring, please leave a comment.