The Fair Isaac Corp, or better known as simply FICO, is making changes to their scoring system this year. FICO, after many discussions with lenders and the Consumer Financial Protection Bureau, plans on lowering its weight towards medical collections in hopes of increasing lending without creating higher credit risk. Historically, account collections significantly reduce consumers credit up to 100 points under certain circumstances. Even with a paid balance, it may stay on your credit up to seven years if no proactive steps are taken. With roughly 64 million consumers with medical collections, the new changes may come as good news. The change may help tens of millions of consumers get a loan and increase consumer credit up to 25 points without any changes done by the consumer.
The changes, however, may help consumers obtain credit cards and auto loans first. As for home loans, lenders typically trail and use prior versions before adopting the next version as the risk for lending on such a purchase has significant risks. If you are interested in purchasing a home in the Ventura County area, contact David Jaffe with On Q Financial or Miguel Viesca with Crossline Capital to discuss your specific home loan needs.
Chris Chin |Broker & Owner
September 29, 2014