Equifax, Experian and TransUnion will also no longer include medical collection debt under at least $500 on credit reports

 Consumer Reporting Agencies to Remove Most Medical Debt From Credit Reports

The three nationwide credit reporting agencies, Equifax, Experian and TransUnion, announced that effective July 1, 2022, they will no longer include medical debt that was paid after it was sent to collections on consumer credit reports.

The companies’ CEOs provided a joint statement on the decision to change their approach to medical collection debt reporting:

“Medical collection debt often arises from unforeseen medical circumstances. These changes are another step we’re taking together to help people across the United States focus on their financial and personal wellbeing,” said Mark W. Begor, CEO Equifax; Brian Cassin, CEO Experian; and Chris Cartwright, CEO TransUnion. “As an industry we remain committed to helping drive fair and affordable access to credit for all consumers.”

The time period before unpaid medical collection debt would appear on a consumer’s report will be increased from 6 months to one year, according to a press release, “giving consumers more time to work with insurance and/or healthcare providers to address their debt before it is reported on their credit file.”

In the first half of 2023, Equifax, Experian and TransUnion will also no longer include medical collection debt under at least $500 on credit reports.

The changes will remove nearly 70% of medical debt in collections accounts from consumer credit reports.

What credit score do mortgage lenders use?

Which FICO Score Generation Do Mortgage Lenders Use?

The best-known credit scores are going to fall under either the FICO or VantageScore brands. There are multiple generations of each score brand, as every few years, the score developers create newer versions. So, for example, there’s a VantageScore 1.0, 2.0, 3.0, and 4.0.

In most lending environments outside of mortgages, it’s hard to know which specific credit score a lender will use to evaluate your application. And, even if you knew your lender used a FICO Score or a VantageScore credit score, you still would not know which generation of the score it is using.

For example, you may apply for an auto loan with one lender that checks your FICO Auto Score 8 based on your Experian credit report. Yet, if you apply for financing with a different auto lender, it may opt to check your VantageScore 3.0 score based on TransUnion data.

The only way to know for sure is to ask the lender which credit report and which credit score version it plans to check, but that isn’t a guarantee that they’ll tell you.

The mortgage industry is different. Because of the aforementioned FHFA mandate, mortgage lenders must use the following versions of FICO’s scoring models:

FICO Model	Description
FICO 9	Newest version. Not widely used.
FICO 8	Most common. Used for Auto and Bankcard lending.
FICO 5	Used by mortgage lenders. Built on data from Equifax.
FICO 4	Used by mortgage lenders. Built on data from TransUnion.
FICO 2	Used by mortgage lenders. Built on data from Experian.

• Experian: FICO Score 2, sometimes referred to as FICO V2 or FICO-II
• TransUnion: FICO Score 4, sometimes referred to as FICO Classic 04
• Equifax: FICO Score 5, sometimes referred to as BEACON 5.0

Why Do Mortgage Lenders Use Older FICO Scores?

The reason mortgage lenders use older FICO Scores is because they don’t have a choice. They are essentially forced to use them.

Unlike every other industry, mortgage lenders don’t have the flexibility to choose the scoring model brand or generation they want to use. Mortgage lenders must follow the direction of the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, as it pertains to scoring models.

The GSEs play an important role in mortgage lending. These publicly traded companies buy mortgages from banks, bundle them together, and sell them to investors. This frees up funds so that banks can offer new mortgages to additional homebuyers.

For a bank to sell a mortgage to Fannie Mae or Freddie Mac, the loan has to meet certain guidelines. Some of these guidelines require borrowers to have a minimum credit score under specific FICO Score generations.

If a lender uses a different scoring model other than what the GSEs approve when it underwrites a mortgage, it probably won’t be able to sell that mortgage after it issues the loan. This limits the lender’s ability to write new loans because it will have less money available to lend to future borrowers

Link to article below

https://www.badcredit.org/how-to/which-fico-score-do-mortgage-lenders-use/