Transcript for FICO Recalculates Medical Debt Policy
Okay. It's Friday August 8 -- New York markets are open it is big number nine point four million U. Might be one of them because that is how many people whose Michael's store score. May actually increase all thanks to new policy by the credit rating company. Everyone I'm -- that's clear in New York to hear the jets are electric Yahoo! finance story on this Friday morning Rick and so what -- the fine folks at spike got done. While they're they're gonna put less weight on medical debt that people have on their credit report and have also decided that if you have some. Old bill that went to a collection agency but you ended up paying. Others gonna take that off your report you know that as something that kind of makes your credit look bad because. After all somebody. Somewhere along the way had to turn your -- over to a collection agency but I think what what this company is now many say is look if you paid that off we're just gonna consider that to to not be a factor in your credit score. And this is gonna improve credit scores for a lot of people so how much then. -- an average increase my people see because of these changes -- obviously depends on how many of these things you have on your record. But we're looking at maybe 2530 points of improving your credit score so it's not good -- dramatically change your financial prospects but one thing -- could do for some people. Is bump you into a higher. Credit categories there sort of these cut off points or threshold is that determine whether you make it into the top category the next one. -- yen up in those sub prime categories. And that there can be meaningful difference you can get over the I think 760. Is that score they -- -- kind of into the top tier the prime -- that means you're gonna get the best interest rates at that level. So this -- bump you into that upper tier. Could save you some money. Some serious money in fact let's break it Dallas probable screw it right here there's so much of a difference. Just a single point on a fight a scorecard right now according to a former research services a 760 score which reporting -- -- as an average score there. If you have an interest rate of three point 82%. A 759. We'll get you -- four point 04%. Now. You put that onto a thirty year 300000 dollar loan that's almost 141000. Dollars more in insurance so. Real money it might not necessarily as -- -- -- -- mean the difference between whether your except that are denied for alone but seriously for those that have already qualified. That's and that's that's big money. That is big money and I think there'll be other cases in which he will actually determine. Whether you get qualified or not it could actually -- you from getting turned down. For a -- to qualifying for -- -- same thing so there's a different threshold for whether you qualify and you could see definitely help some people get over that threshold. Not to be that -- aired all of this but why this -- -- doing this is it just out of the goodness of their heart. Well they do revise their methodologies from time to time and also. The -- Consumer Financial Protection Bureau has gotten on their case particularly about medical that I mean. Medical that is a huge problem it's -- it's the top. Cause of personal bankruptcies in the United States we we all know how expensive health care is you know people who take on medical -- Are often people just hit with a surprise problem that has a gargantuan price tag attached to it so you know you could be perfectly. Capable of managing money and suddenly if you've got 101000 -- 100000 dollars it in me in new debt for problem that you couldn't possibly anticipate. The you know that obviously affect your finances and a serious way but that doesn't mean you're irresponsible with credit -- I think that's part of the reason that they are going to change the waiting put less emphasis on medical -- that's. That's important I mean that that -- that affects a lot of a lot of American surprisingly large number and I think. Many of those people would agree you know I'm I'm actually pretty good -- handling money I had no idea this huge bill is coming. Bryant breaks -- so. They if you look at this and at first blush it looks as if there's a huge benefit for consumers but given the fact that it's going to be potentially easier to take on more debt eventually from this. What's the downside -- Jenkins. Well a couple possible downsides first. Some people are worried that. This actually will lead to riskier lending by banks. In other words it will make some borrowers who might be high credit risks look a little better on paper that maybe they should be. But you know at the counter -- -- countervailing fact is that. Banks can still charge whatever interest rate they think is appropriate and they did in these changes saying nothing about. The bank's ability to charge you the interest rate they feels appropriate so. If you're somebody who didn't qualify for a -- before now you just barely -- qualifying you're still gonna pay a pretty high interest rates and that's gonna cover the bank in case there any extra risks there. And it's also likely to get that might also discourage people from taking out these lines just because you might they'll qualify for allowing. Doesn't mean you want it or doesn't mean you're what you're willing to pay the interest rates so. You know we are seeing -- credit standards loosening throw -- the economy for the right reasons in most cases. Lot of people have said economists have said look we actually need more -- not -- We we are still far away from the kind of crazy. Borrowing that happened in 20045. And six out this is them this is a modest measure that probably won't cause anybody to much -- -- -- Reno regardless of the effects of pesticides so they've pretty good reminder to always go back and check your -- Goran periodic basis because -- some surprises. That you thought had been settled in years past king -- for credit. Does wondering -- you you may be able to draw attention to little you know some. Forty dollar bill from five years ago that should never been on your credit report anyway you might feel a draw attention and say hey could you just get this off. Good point good for the -- -- from Yahoo! finance on this Friday morning Rick banks have a great weekend. Thanks incident and of course you can keep up latest headlines right here on abcnews.com. You've -- -- the big number. -- --
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