New FICO score model helps with Medical… Or does it?

New FICO score model helps with Medical… Or does it?

FICO newest scoring model FICO 9.0 has changed its credit-scoring model by putting less focus on medical debts and will give consumers a break on their score IF they’ve settled with a collections agency.

It sounds like FINALLY, the newest credit scoring model helps the little guy, the American consumer. HOWEVER… it’s unlikely to change credit scores for most people anytime soon.

The new model touts paid medical bills are scored as neutral. Note the word PAID, which means if you are settling an account if the letter you get (IN ADVANCE) does not say the account will be marked PAID IN FULL then it will count against you.

For consumers reading this I write a lot of these blogs to help educate you when either thinking about fixing your credit on your own or assessing if you believe I am a reliable and solid company to work with to help achieve your financial goal.

It has recently come to my attention that some other credit repair companies have been reading these to help educate themselves on credit so after hearing this and deciding it is not my job to educate other companies who go around stating they are credit specialists I am going to explain several things on each topic and blog but not go into the major detail on certain aspects of the topics.

BUT BACK TO THE IMPORTANT INFORMATION!

The limits of these collections are $100 as mentioned by FICO. While many times there are medical bills on consumer credit numbering in the thousands many, many times there are what seems to be a ton of “little” bills ranging from $3 to 75. So paying these pesky little annoying bills seems like the perfect way to help your credit.

People cannot help getting sick and the medical business (yes I said business not industry) is littered with incompetency. Don’t believe me? If you have a few medical bills try going to the place where you had the services ( if the debt is a little old) and then ask for the manager and see what they can do to take the debt back from the collector so you can pay them directly (warning if you have long hair be prepared to pull it out).

So at face value this looks like a plus for consumers but here is the analogy that will make the reality of this stick. What good is the model if the banks/lenders/analysts do not use the model?

The financial industry is loath to change and while the previous scoring model came out a few years ago a majority of the lenders have not utilized it and only a few have recently started to.

PLUS… if the lender does not feel the new model represents the true picture of a consumer’s financial wellbeing and stability, why would they use it?

And if you are trying to buy a home then do not expect when the news articles hits that FICO 9 is now available and consumers are expecting to see an approximate 25 point increase in score, be prepared to be disappointed.

 

Want to learn more about how credit actually works and how lenders view you? Buy my book “The Real World of Credit” on my website www.waynethecreditguy or go to www.BN.com and get the electronic version on Barnes and Nobles website!

The ABCs of Establishing Good Credit

Wayne the Credit Guy discusses the keys to establishing good credit in this new article on FreeCreditScore.com.

“The credit game has become a business, and in order to make money that business must keep consumers in debt,” says Wayne Sanford, aka “The Credit Guy.” “Not knowing the rules of the game and having no knowledge of the fine print keeps the consumer tied to the system.”

Read the full article here.

Do You Really Need to Worry About Your Credit Mix?

Analyzing The Credit Mix that Goes into Your FICO Score

Wayne the Credit Guy discusses the impact your “Credit Mix” has on  your FICO score in this article on CreditCardForum.com.

Excerpt:

If you want to keep things simple, credit can be broken into two categories that contribute to your account diversity: (1) Revolving lines of credit (ie, credit cards) and (2) installment accounts (student loans, mortgages, car loans, etc.), says Wayne Sanford, founder of Dallas-Fort Worth–based New Start Financial.

Why does FICO reward those who have both? Keeping up with installment loans demonstrates the reliability lenders like – but these loans also come with a big incentive to make payments on time (they’re often secured with your house or vehicle). Revolving accounts give you a lot more freedom to fail, since you don’t run the risk of losing the things you bought with them.

Perfect Credit Score Makes News

There is a difference between good credit and perfect credit. In fact, perfect credit is so rare, it makes news when it happens. Like a Vegas Casino, the credit game is set up with the house winning more than not…contact Wayne the Credit Guy and learn how to make the credit game work for you.

 Less than 2/10ths of 1% of the “scorable” population has a perfect 850 FICO score.

http://www.mainstreet.com/article/moneyinvesting/credit/debt/man-achieves-perfect-credit-score-issues-press-release

You Get What You Pay For Many Times: Watch for the * Near the “Free”

They always say nothing in life is free, credit karma has ads all over TV and the radio saying why pay for your credit score… read the link attached if you have them and ask yourself again how awesome their free product is. And remember, just like everything else in life you never get the whole story so what else do we not know about? Knowledge is power!

Also understand the different types of credit scores that are out there. While they all come from the same source it’s the lenders who put the different values on the information the credit bureaus have.

http://www.ftc.gov/news-events/press-releases/2014/03/fandango-credit-karma-settle-ftc-charges-they-deceived-consumers