FYI - Older article on Fico 09 scoring pasted below with link.
http://www.foxbusiness.com/features/2014/08/08/fico-new-credit-score-formula-helps-many-hurts-some.h...
FICO's New Credit Score Formula Helps Many, Hurts Some
By Fred O. Williams Published August 15, 2014
A new version of FICO's credit score formula will raise the scores of people with medical debts, or who paid off other debts in collection.
But people with unpaid debts on their record that aren't related to health care would see their scores fall, making it harder for them to get a personal loan or credit card, or raising the interest rates they'll have to pay, FICO said.
The changes potentially affect tens of millions of people -- but don't expect big changes in your credit right away. The score is expected to be available to lenders around the end of this year. And lenders typically take months to try out new scoring formulas on their loan portfolios, to see how accurately the new scores predict problem loans.
"They don't just flip a switch," said Rod Griffin, director of consumer education at Experian. "They're going to want to test the new model."
Bank of America, for example, "will evaluate the benefits of the new FICO model," BofA spokeswoman Betty Riess said in an email response to questions. "When we look at credit requests, we take into account a number of factors, including our internal customer information."
FICO's New Formula
FICO, the source of the score used by most lenders, said Thursday that it is rolling out a new formula called FICO Score 9 Opens a New Window. . The new score will drop collection agency accounts that are paid off, whether paid in full or settled, FICO spokesman Anthony Sprauve said. It will also differentiate medical debt from other types of unpaid debt.
Under the new formula, the typical credit score of 711 should rise 25 points for people with medical debts but no other serious demerits on their credit record, Sprauve said. Of all accounts in collections, only about 10 percent are paid off, he said. Consumer advocates applauded the change -- one they have pushed for years -- as bringing more fairness to lending decisions. Debt in collection affects a broad swath of U.S. consumers. About 77 million people in the U.S. have some debt in collection on their credit report, according to a study Opens a New Window. by the Urban Institute and the research arm of debt buyer Encore Capital Group.
"It's definitely good news -- about half of the negatives on consumers' credit reports are from medical debt," said Chi Chi Wu, staff attorney at the National Consumer Law Center. Medical debt frequently winds up in collections because of insurance billing problems, not because the consumer can't pay, she said.
Health care bills are the most common type of debt in collection, representing about 38 percent of total debt collected, according to a survey by the collection industry group ACA International.
Medical Debts Injure Scores
In May the U.S. Consumer Financial Protection Bureau released a study that found people with medical debts were overpenalized on their credit scores, based on their overall debt payment record. For people with paid-off medical debts, the penalty amounted to credit scores 16 points to 22 points lower than people with similar repayment histories, the agency found.
By the same token, people whose unpaid debts were nonmedical benefited from higher scores than their repayment history warranted, the study found. FICO representative Anthony Sprauve said that FICO 9 will result in some reduction of scores for people whose unpaid debts are nonmedical debts, but no estimate of the size of the reduction was available.
While FICO can make a new formula available, it is up to lenders to use it to evaluate loan applicants. The FICO 8 formula was announced in 2009, and in 2010 FICO said that 2,700 lenders were using the new formula. But it wasn't until mid-2011 that it announced a major credit card issuer -- Citi -- had adopted the new formula Opens a New Window. , saying the card business had evaluated the new formula for 18 months. Griffin of Experian said some lenders continue to use early scoring models back to FICO 2 and 3.
Fico 9: .......EQ 850 TU 850 EX 850
Fico 8: .......EQ 850 TU 850 EX 850
Fico 4 .....:. EQ 809 TU 823 EX 830 EX Fico 98: 842
Fico 8 BC:. EQ 892 TU 900 EX 900
Fico 8 AU:. EQ 887 TU 897 EX 899
Fico 4 BC:. EQ 826 TU 858, EX Fico 98 BC: 870
Fico 4 AU:. EQ 831 TU 872, EX Fico 98 AU: 861
VS 3.0:...... EQ 835 TU 835 EX 835
CBIS: ........EQ LN Auto 940 EQ LN Home 870 TU Auto 902 TU Home 950
