In a move that could be a boon to first-time homebuyers, Fair Isaac Corp. has said it will make changes in the way FICO credit scores are calculated. FICO scores are used by the vast majority of lenders.

Starting this fall, the company will give less weight to unpaid medical bills when assessing creditworthiness and won’t penalize a borrower’s credit score if he or she has had bills settled with a collection agency, U.S. News & World Report reported.

A FICO spokesman said the company’s research had shown that a medical collection was not an indicator that someone was in trouble and was becoming a higher lending risk.

Including medical debt in credit scores could cost a borrower tens of thousands of dollars in interest over time on home mortgages.

“This move will ultimately make a real difference in the lives of millions of Americans, who have been shut out of the housing market or forced to pay higher mortgage interest rates because of flawed credit scores,” Steve Brown, president of the National Association of Realtors, said in a statement. “Since the housing crash, overly restrictive lending has been the greatest obstacle to homeownership.”


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