In 2019, the biggest alteration in three decades is approaching how Fico credit scores are calculated. The new program is called UltraFICO^TM Score.

The game is changing, and most consumers will benefit from these changes. How could medical providers be affected by this new change? Having patients pay for medical services with available credit can reduce patient payment amounts going to bad debt, therefore driving more revenue to the provider’s bottom line.

When creating a FICO score, rather than counting on a consumer’s credit payment history, the Fair Issac Corp.(issuer of FICO scores) will instead factor in “how consumers effectively manage the cash in their checking, savings and money-market accounts.”

The UltraFICO^TM Score is meant to boost a consumer’s odds of approval for credit cards and personal loans. Instead of looking strictly at on-time payments, FICO will also look at a person’s current checking balance, length of checking history, transaction frequency and overdraw history. With an UltraFICO Score, a consumer must simply link their checking, savings or money market accounts through an app on their phone. By doing so, it creates the possibility that the UltraFICO Score could enhance a consumer’s credit score based on indicators of responsible financial behavior. By opting in, consumers can broaden access to more lending options and better terms. Better credit could lead consumers to qualify for healthcare financing for their medical care.

For all U.S. consumers who have Fico Credit Scores, a surprisingly high number—58.2%, have a score of 700 or higher on a scale that tops out at 850. The average FICO score sits at 704. Lenders may have different cutoffs, but Experian considers scores under 670 subprime.

FICO says that about seven million applicants who have low credit scores as a result of questionable borrowing histories would likely see their scores increase under the new system. Separately, some 26 million subprime borrowers will endup with higher credit scores, FICO said, with nearly four million seeing anincrease of at least 20 points.

Consumers with an average balance of at least $400 who haven’t overdrawn in the prior three months would likely get a boost, FICO said. A lender can offer to have the score recalculated to reflect a consumer’s positive banking history.

The addition of the UltraFICO^TM Score is intended to help those who do not have an extensive credit history. However, not everyone will see a rise in their score. A FICO representative said that some scores might see a decrease. FICO claims the Ultra score will “attract the underbanked—the self-employed, millennials, immigrant entrepreneur, migrant savers, and remitters” and give people who “may have suffered financial distress but are recovering” a second chance.

But as Ted Rossman, CreditCards.com’s industry analyst, says, “the possible unintended consequence of including bank account balances would be an increased focus on income and assets. Historically, your FICO score has been affected by how well you manage your money, not how much money you have.”

And while the changes are coming from FICO in 2019, it will likely take a while to trickle down to consumers.“FICO’s last big update, FICO 9, came out in 2016 but the most common system being used by lenders is still FICO 8,” says Rossman. “That means things like medical debt, paid collections and tax liens are still hurting many consumers more than expected.”

But for those without a credit history or who have a few dings against them, the new system could give them a boost. A higher consumer score could create the availability of more access to credit for patients. Healthcare providers could see a slight drop in bad debt write-offs if patients have greater access to credit and they use it to pay for medical services.

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Phil C. Solomon is the publisher of Revenue Cycle News, a healthcare business information blog and serves as the Vice President of Business Development for Teleperformance, a healthcare revenue cycle outsourcing company.  As an executive leader, he is responsible for creating and executing sales and marketing strategies which drive new business development and client engagement. Phil has over 25 years’ experience consulting on a broad range of healthcare initiatives for revenue cycle performance improvement.  He has worked with industry’s largest health systems developing executable strategies for revenue enhancement, expense reduction, and clinical transformation. He can be reached at [email protected]

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