Even the most responsible borrowers slip up sometimes. Maybe a utility bill went unpaid after you moved and the missed payment went into collections. Or perhaps there are unpaid library fines or parking tickets in collections that are hanging on to your credit history and affecting your FICO credit score, which is widely used by lenders to evaluate your ability to repay debt.
With the newest version of the FICO credit scoring system, however, minor delinquencies are now overlooked in calculating credit worthiness.
Under the updated scoring model, called FICO 08, small missed payments lingering in collections with original amounts of $100 or less will no longer do damage to your credit score.
Consumers also are less likely to be penalized for any single delinquency if it occurred two or more years ago- and if their credit history is otherwise unblemished. There’s more flexibility with missing a payment. If you have a more habitual pattern of paying accounts late, you’re more likely to get penalized for that.
If a consumer’s credit usage is high, that will be more likely to hurt his or her score with FICO 08. But getting close to your credit card limits- even if you always pay on time- is penalized in some way in very FICO score, not only the recent edition.