Credit scores affect your life more than you might think. Banks, credit card companies, auto dealers and a host of other businesses rely on this number to help them decide if you are credit worthy. The higher your score, the more likely you are to obtain a loan, and the better the terms of that loan are likely to be.

That’s why FICO’s recent announcement that it’s changing the way it tallies credit scores will be welcome news for many, particularly those who have experienced a drop in credit scores due to medical issues.

FICO’s credit scores are used widely in lending. Recently, Fair Isaac Corp., FICO’s parent company, announced these significant changes:

• Debts sent to collection agencies that are repaid, whether in full or for a settled amount, will no longer count against a consumer.

• Medical debts won’t weigh as heavily. According to a FICO spokesman, a current typical credit score of 711 should rise 25 points for those with medical debts but no other serious demerits on their credit record. (Experts note that about half of the bad debt on consumers’ credit reports stems from medical issues, often because of insurance billing problems, rather than the consumer’s inability to pay.)

• Those without a large credit history (“so-called thin files,” according to FICO) can still be evaluated for credit worthiness, through a new analytical technique.

On the down side, the new evaluation formulas will decrease the credit score of those with unpaid nonmedical debts more than in the past, though FICO hasn’t yet released the size of that reduction.

For more information on this or other lending questions, call or email Sean Mahoney or Cameron Burl (mahoney@megastarfinancial.com, cburl@magastarfinancial.com, 303-321-8800.

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