What You Need to Know About the FICO Score Change and How It Impacts You

Your FICO score is something you need to keep an eye on throughout your adult life. Many banks and credit unions look at this score when determining whether to give you a loan. A landlord will likely check your score to see whether you’re a suitable candidate to rent a property they have available.

Because of this, you should know about the FICO score change that is happening right now. We will discuss it and its ramifications in the following article.

Medical Bills and FICO Scores

Generally, outstanding debts come into play when your FICO score is calculated. If you have debts you can’t pay back on time, that lowers your score. That’s why it makes sense to pay back all your debts on time if you can manage it.

Medical bills are one of the biggest causes of debt in America. Privatized healthcare coupled with low wages makes this inevitable. Since socialized medicine doesn’t seem to be coming anytime soon, you might find yourself in a situation where unpaid medical debt is causing your FICO score to drop.

Changes Regarding Medical Debt and Credit Scores

If you have unpaid medical bills, the provider might turn you over to a debt collection agency. When that happens, the debts appear as delinquent on your credit report.

However, on July 1st of last year, a change was made to help consumers. From that point forward, your medical debt won’t show up on your credit report for at least one year. That gives you more time to pay it before it negatively impacts your FICO score.

Last year saw one additional change as well. After July 1st, if you pay your medical debt that has gone to a collection agency, those records get removed from your credit report. In the past, it could take up to seven years for that delinquent debt to get removed from the report, even if you paid it off.

One More Change is Coming

While last year’s developments should help consumers, there’s one more change happening this year, and it’s potentially even bigger. VantageScore, one of the most prominent credit reporting agencies, is going to stop including medical debt on its credit reports. That means if that’s the main cause of your debt, it’s not going to impact you in the same way it once did.

FICO is still the score that most potential lenders and landlords use when figuring out whether you’re a candidate for a loan offer or to move into a house or apartment. If VantageScore’s idea catches on, though, it’s possible FICO could start doing the same thing. The other main credit reporting bureaus, Equifax and Experian, might follow suit.

What Does This Change Mean in 2023?

VantageScore no longer counting unpaid medical debt against you when determining your score is a huge win for consumers. If you apply for a loan in 2023 or try to rent an apartment, you might specifically ask the lending entity or landlord to check your score with VantageScore. If you have unpaid medical debts, your score will look more favorable because of this impending change.

As for your FICO score, your Equifax score, or your Experian score, those will be unaffected by this change, but that might not be the case for very long. The other credit reporting bureaus understand the pressure put on some individuals to pay medical bills if they’re uninsured or underinsured. They may very well adopt the same rules in the near future.

These positive changes regarding medical debt and credit reporting bureaus seem to signal a shift in how these companies regard this common affliction. Consumers should keep an eye on the situation for further developments. For now, any incremental progress of this kind should be viewed as good news.