Details About the FICO Score 9 – The Updated Credit Scoring Algorithm from FICO

The FICO score 9 offers positive changes that are more lenient compared to FICO score 8's algorithm. View three major differences in this updated version.

The FICO three digit score can have a significant impact on many in the U.S. They determine, on a variety of factors, how reliable you are when it comes to finances.

FICO has released a fresh version of its rating algorithm called FICO score 9.

It includes some changes to the way the score is computed. This new method offers consumers whose credit file contain certain types of negative information to have less of an impact.

These changes can have a huge effect on consumers and lenders.

Below are a few things you should know about the new changes:

#1 Rental payments are factored in to credit score

Now, your on-time rental payments will improve your credit score thanks to this update. This update will assist those who have little to no credit history as they can begin to establish a score.

Credit history accounts for 35% of your score, so this is a huge factor in determining creditworthiness.

#2 Collections debt that has been paid off does not affect your score anymore

Any unpaid collections debt will lower your score, but once you’ve paid it off completely, your score will not be negatively impacted.

That’s good news because as of 2017, the total amount of debt Americans hold is $931 billion dollars. The year prior was seven percent lower than that amount.

#3 Medical debt is now treated differently

FICO found, through extensive research, that medical debt isn’t a good indicator of someone’s creditworthiness. So if you have medical debt in collections, it won’t affect your score as severely as previous score algorithms.

While this is good news, keep in mind that most lenders still use the FICO Score 8 model which is more punitive when it comes to medical debt.

These changes are good for consumers and lenders alike

With these changes in place, FICO believes it can better categorize consumers based on likelihood of paying back a loan. So lenders won’t take on too much risk.

And with rental payments now a factor in your score, those with little to no credit history can start building credit via rental payments.

Prior to this, a catch-22 scenario would play out because in order to get approved for a credit card or loan, one must have credit history. But you need a credit card or loan to establish that history.

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