Did you know that credit scoring models are constantly evolving? Many consumers have an idea of what goes into a credit score–payment history, account balances, account mix, etc. But they don’t know that the way lenders look at these items is constantly fluctuating. As further evidence of this, we now have a brand new credit score, called the FICO Score 9.

Credit scoring companies such as FICO are always seeking better ways to more accurately predict consumer behavior. This is, after all, what your credit score is all about. It’s simply a way for a potential creditor to see how likely you are to repay your debts.

The more accurate a credit score is, the better decisions lenders are able to make. This is why companies like FICO are constantly tweaking the algorithms they use to turn the raw data in your credit report into a numerical score.

How To Get Your Credit Score for Free

Many times, these changes are made without much notice. Consumers like you and me may not even realize that FICO or another company has made a change to its credit scoring algorithm. But when FICO recently rolled out the FICO Score 9, it made a bigger-than-usual splash for a couple of reasons. Here’s what you need to know:

Unpaid Medical Debt Counts Less Heavily

In older credit scoring models, any unpaid debt in a collections account counted very heavily against your credit score. And most unpaid debt that has gone to collections still will. After all, if you’ve let a debt go to the point that it’s in collections, you’ve clearly had some financial issues to work through.

However, the FICO Score 9 now counts unpaid medical debt differently than other types of debt that have gone to a collections account. The reason is because so many consumers struggle with unpaid medical debt. As a result, this type of debt doesn’t really speak to a consumer’s overall financial health.

Since unpaid medical debt isn’t a great predictor of financial irresponsibility in the future, FICO decided to give it much less weight in its new credit scoring formula.

For consumers, this means that medical debt gone to a collections account won’t be as big a worry when it comes to their credit scores. If you’ve been unable to get credit in the past because of medical bills, you may be able to do so now if a lender uses the FICO Score 9 when making lending decisions.

Paid-Off Collections Accounts Don’t Count

In many older scoring models, accounts that have gone to collections but were since paid off still counted as part of your score. In fact, they followed you around as a negative report for several years after you had paid them off. With the FICO Score 9, this is no longer the case. Third-party collections accounts no longer count as part of your score once they’ve been paid off.

This is great news for consumers who are recovering from tough times or just poor financial decision-making. If you’ve gotten over the hump and managed to pay off your collections accounts, you should see an increase in your FICO Score 9.

Learn More: Credit Reports vs. Credit Scores: Do You Know the Difference?

One caveat here: collections accounts will still appear on your actual credit report. When a potential lender pulls your credit, they’ll see both your score and your report. Lenders using the FICO Score 9 know that those collections accounts arent part of your credit score, but may give them some weight as long as they still appear on your credit report.

Rental History May Count

As more and more Americans hold off on homeownership for whatever reason, building credit has taken more time and work. After all, for prior generations, those on-time monthly mortgage payments were a big part of building excellent credit.

Today, credit bureaus have started to take notice of the trend in longer-term rentals. They are even offering ways to collect rental-related information as part of your credit file. Until the FICO Score 9, though, that rental information didn’t have much impact on your actual credit score. The scoring models just weren’t built to take it into account.

The FICO Score 9 now includes rental history in your score, though, whenever it’s available. This can be helpful if you have a limited credit history but have been steadily paying rent on time for months or even years.

What Does it Mean for You?

The FICO Score 9 could change creditworthiness dramatically for some consumers. If you have a limited credit history but a long history of on-time rental payments, for instance, your FICO Score 9 could show a much higher credit score than other scoring models. Or if you’ve struggled with medical debt but have made solid financial decisions otherwise, the same could apply.

You can actually see how much difference the FICO Score 9 could make in your credit score when you pay for your score from myFICO. The company is currently offering consumers access to this new scoring model, alongside the old model. That way, you can see just how much your score is changed by the new calculations.

Unfortunately, consumers have little control over which credit scoring model potential lenders will use. Lenders still have access, for the time being, to older FICO scoring models. So you could have a much better score with the FICO Score 9, but still be denied credit because a lender has pulled your credit using an older scoring model.

With that said, FICO is still the most popular scoring model around, and many big lenders are jumping on board with this model. As time goes by, you should see more and more lenders using the FICO Score 9 as opposed to older scores.

This will only be helpful for consumers who have medical debt, paid-off collections accounts, and/or rental history in a credit report that otherwise shows responsible financial behavior.

Have you checked out your FICO Score 9 yet? How do you foresee it impacting your credit report?


  • Abby Hayes

    Abby is a freelance journalist who writes on everything from personal finance to health and wellness. She spends her spare time bargain hunting and meal planning for her family of three. She has a B.A. in English Literature from Indiana University Purdue University Indianapolis, and lives with her husband and children in Indianapolis.