Michigan consumers may be aware of the imminent changes to the grading requirements of FICO that allocates credit scores to consumers. There are three significant changes that may be to the advantage of many consumers. However, it will not solve credit card debt issues, and consumers may want to continue sensible credit card use.

FICO is a credit rating system that can positively or negatively affect the monetary lives of every consumer. It was determined that the current system has, unfortunately, disadvantaged some consumers, and the updated version — called FICO 9 — will address those aspects. Consumers with outstanding medical debt will no longer be penalized. FICO realized that medical debt is not intentional spending and is often unanticipated and out of the consumer’s control. Although unpaid medical debt will not be entirely disregarded, it will carry less weight, and consumers who have a low credit rating primarily because of medical debt may see a raise of approximately 25 points in their credit score.

According to the current FICO rating system, settlement of debts that were in collections remained on an individual’s credit history and negatively affected his or her credit score. This will no longer be the case, and the credit scores of consumers who have settled such debts may find an improvement of up to 100 points in their rating. Another group of people who have, up to now, been at a disadvantage are those who have little or no debts and therefore no credit history. Such consumers will no longer be penalized, but their credit scores will reflect the real loan risks rather than assumed risks.

While FICO 9 may benefit Michigan consumers in the future, those who are currently experiencing overwhelming credit card debt may be in need of professional guidance in finding a solution for their financial dilemma. Considering the protection of personal bankruptcy may be the first step to financial stability. Obtaining information about the available bankruptcy options that are available, and the required criteria to qualify for each, may help you make informed decisions about your financial future.

Source: bbb.org, “Three New Changes That Can Affect Your Credit Score“, Carson Rolleri, Sept. 29, 2014

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