03 Sep 2018

FICO’s New Credit Score Calculation: Will It Boost Your Credit?

FICO, the major credit scoring company in the US, recently made changes to the way they calculate credit scores. These changes might improve some people’s credit scores, making it easier to obtain loans and lines of credit, an especially good thing for Americans still feeling the impact of the economic decline. Your FICO score is important because it comprises much of the credit report that lenders see when they evaluate you for a loan application. Generally, your score will fall between 300 and 850—the higher the number the better. Could the recent changes improve your credit? Read on to find out more.

How the Changes Could Help You

Improving your credit score is always a good thing—especially when you’re seeking a loan to buy a home, start a business or buy a car. The new way FICO evaluates credit scores will be beneficial to those who have paid off medical bills and collection agencies; FICO will do more to differentiate between medical debt and other kinds of debt. This is good news for those who have struggled in the past with medical debt, raising the average score of 711 by 25 points, according to Fox Business. Many supporters say this brings an improved level of fairness to the lending decision process.


This change came about in August of 2014, when FICO announced this different method of assessing consumer collection information, resulting in a more predictive score than before, says FICO. In addition to those who’ve incurred medical debts, those with a limited credit history will be better protected under the new changes. This is because it used to be a lot harder to assess the risk of those with little to no credit history, while the new system is designed to provide a better picture when it comes to degrees of lending risk. Overall, with medical debt not affecting your score as much as it has in the past, you may enjoy a higher credit score and thereby qualify for a better loan with a better interest rate.

Be Diligent

It’s exciting that the changes FICO made to their scoring practices could help boost your credit score, but that’s no reason to ease off on your diligent credit monitoring practices. It’s still extremely important to maintain a steady, positive credit history.

Bankrate advises having a debt-to-credit ratio of 30 percent or lower, meaning that you only use about 30 percent of the credit available to you. Keep your balances low and pay them off each month if you can. Pay off all your smaller cards with low balances on them and keep your purchases to one or two major credit cards instead. Don’t get rid of old debts that might reflect well on you by having them removed from your credit record. Leaving good debts there will show lenders you have a history of paying off debt responsibly.

FICO’s scoring practices may have changed, but the need to have a good credit score isn’t going anywhere. If you have low or no credit, you should be taking steps to improve your credit score whenever possible.