Paid-in-full Collections Disregarded from FICO 9 Credit Scores

Discussion in 'Credit Talk' started by JoshuaHeckathorn, Jul 28, 2016.

  1. JoshuaHeckathorn

    JoshuaHeckathorn Administrator

    There aren't many lenders out there using the new FICO 9 Credit Score yet, but I'm curious to hear if anyone has recently worked with a lender who is? I haven't found one yet. If you have, I'd love to hear from you.

    As you may already know, the new FICO 9 Credit Score not only disregards collections that are paid in full, but it also treats unpaid medical collections differently than other unpaid collections. FICO has basically said that its research proved unpaid medical debt is not always a great indicator of an individual's ability to make timely payments on loans, so the new FICO 9 Credit Score discounts the negative impact of unpaid medical debts in some fashion. It doesn't disregard them completely, but FICO has been clear that the model places less weight on them so they don't impact your FICO scores as much as other unpaid collections.

    This is obviously a great step in the right direction for consumers, but banks and lenders are notoriously slow to adopt new credit scoring models. In fact, mortgage lenders following Fannie Mae/Freddie Mac underwriting guidelines are still forced to use old FICO credit-scoring models that were in place well before FICO 08 was released 8 years ago. I wonder how long it will take them to actually adopt FICO 9? Or perhaps they never will?

    Have you paid a collection in full and seen an immediate increase in your FICO scores? If so, it's most likely because you're looking at a FICO 9 credit score. I'd love to hear about your experience and get more details. Thanks!

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