New FICO Score 9 will change the way collection accounts are scored and could help many credit challenged consumers
What we see
Here at Auto Credit Express, in a previous article we covered the various changes that will take place this fall when FICO rolls out its newest scoring model, FICO Score 9. In this article, however, we'll focus on just one aspect of the new credit score: the way it will treat paid collection accounts.
How Fico 9 Affects:
Paid Collection Accounts
In the past, it made little difference to a FICO score if a collection account had been paid or it was unpaid. Either way, the account remained on a credit report and, more importantly, impacted the FICO score – even if it was a "paid collection", until it rolled off after seven years.
During those seven years, the impact of the account would lessen over time. All in all then, there was little reason for anyone with an account in collection – especially when it was a small amount and with very little chance of any enforcement action – to pay it off.
That could all change this fall when FICO rolls out its latest scoring model, and it could have an affect on you come time to prequalify for an auto loan.
One of the changes in FICO Score 9 is that the score will not include paid collection accounts. While all collection accounts will remain on a credit report, those that are paid will now be ignored by FICO. In other words, those consumers that pay their bills – even those in collection – will be rewarded with a better FICO score.
Timing is Everything
But there is a word of caution in all the good news for bad credit borrowers that start paying their collection accounts.
Although it will be available to lenders this fall, it will take some time before those who choose to use it them will start implementing it, so it could only have limited affect come time to apply for that poor credit auto loan. Also keep in mind that, as a consumer, you'll never know which scoring model a particular lender is using.
For now, most credit-challenged consumers should practice good credit basics: paying all their bills on time as well as paying their collection accounts – beginning with those with the lowest balances.
The Bottom Line
The newest FICO scoring model will now reward consumers that pay their collection accounts with a higher score. But while it may take time to be implemented; consumers with poor credit should get a head start by beginning the process of paying off their collection accounts, if for no other reason that it is one of the fundamentals of good credit.
One more tip: Auto Credit Express helps people that have experienced difficulties with their auto credit find franchised new car dealers that can offer them their best chances for auto loan approvals.
So if you're ready to reestablish your car credit, you can begin now by filling out our online auto loan application.