FICO 9: The 3 Important Changes It Made to Your Credit Score

FICO — short for Fair Isaacs COrportation — is an algorithm that calculates credit scores. While there are a variety of proprietary credit scores in existence, FICO is used by about 90% of all lenders. That includes lenders of mortgages, auto loans, credit cards, store charge cards, and business loans.

Your credit score affects not only whether you will get the loan you apply for, but also the amount, as well as the interest rate you will pay. And apart from loans, credit scores are also used to determine employment, insurance policies, and bank accounts.

In August 2014, FICO introduced FICO 9, which considered three new important factors in calculating your credit score.

Just as there are numerous credit scores, there are also several variations of FICO scores.

Fair Isaacs is continually updating its FICO score products. Every few years they come out with a new version. They’re currently on FICO 10, released in 2020, but FICO 8 remains the most commonly used model.

So, why is FICO 9 still important now? Well, because it introduced a few major changes that are mostly good for consumers:

1. Medical collections — Open medical collections have less impact in FICO 9.0 than they did in previous versions.
2. Third-party collections — These have no negative impact on your credit score if the collections have been paid.
3. Rental history can be included — Prior to FICO 9.0, good rental history was not reported, but bad rental experience was.

Let’s dig deeper into these changes and what they mean for you.

At the time FICO 9 was introduced, The Wall Street Journal, quoting data provided by Experian, reported that 64.3 million people had medical collections on their credit reports nationwide. With medical collections so rampant, FICO 9 aimed to level the playing field by lowering the impact these accounts have on the credit score calculation.

Other FICO scoring models calculated medical collections in much the same way that they did with other types of collections. FICO doesn’t indicate how much difference this change made in calculating scores, other than to indicate that the impact would be lower.

In April 2022, the three major credit bureaus all announced they would stop counting medical debt in credit reports — in line with FICO 9 (admittedly several years later…).

Under previous scoring models, paying off a collection account didn’t have much of a benefit. The person who owed the debt might even be motivated to wait until seven years had passed when the collection (paid or not) would fall off their credit report.

But with FICO 9.0, paying off a collection made it virtually non-existent as far as your credit score was concerned.

That means not only would previously paid collection accounts no longer hurt your credit score, but it also gave consumers an incentive to pay off any that were still open. By paying them off, those accounts would cease to be a drag on your credit score.

In a way, this FICO 9 change was also of benefit to creditors and collection agencies.

With other scoring models, rental history was something of an elevator that only went down.

Good rental history wasn’t reported, even if you had been making your rent payments on time for years. But unpaid balances — from breaking a lease, to being assessed damages after the fact, or money withheld because of an uncooperative landlord — were commonly reported against you.

The FICO 9 model incorporates your rental history into your credit score calculation.

This is good news for people who have good rental histories, or for people who have very little credit and would be helped by a favorable rent reference.

The catch is that, unless you live in a large apartment building operated by a rental management company, it’s unlikely your landlord is reporting your rent to the credit bureau. Instead, it’ll be up to you to report via a service like Experian Boost™ or Rental Kharma.

As mentioned, FICO 10 is the newest iteration, but most lenders are still on FICO 8. More specifically:

• The mortgage industry relies primarily on FICO scores 2, 4, and 5.
• Auto lenders use FICO Scores 2, 4, 5, 8, and 9.
• Credit card issuers use FICO Scores 2, 4, 5, 8, and 9.

In addition, some lenders also make use of in-house credit scoring models based on their own specific credit experience. This may also help to explain the reluctance to adopt FICO’s latest credit scoring model.

Unfortunately, you really can’t.

FICO charges a fee in order for an institution to use their actual credit scores. In general, when you see an offer of free credit scores, they aren’t the 100% real deal (although they are helpful for giving you a ballpark figure of what yours might be). These are usually educational scores calculated to parallel FICO scores.

This helps to explain why the credit scores used by a lender is often much different than what you got from a free credit score service.

FICO 9 broke a lot of new and beneficial ground, including the exclusion of medical collections from the calculation of a consumer’s credit score and the inclusion of rental history, which can help those who have limited credit but pay their rent on time.

Third-party collections, once they’re paid off, no longer became a factor in your credit score, meaning you wouldn’t have to wait seven years to get rid of an old mistake.