New FICO Score 10 Suite May Impact Your Credit Score

FICO announced its new FICO Score 10 Suite[1] of scoring models Thursday, promising more accurate credit risk assessments and significantly reduced defaults. It may also have an impact on your ability to qualify for loans.

The biggest change is in the use of trended data to help lenders get a more accurate picture of your ability as a consumer to take on credit.

They could lead to more offers and better rates if you can prove your history of good credit use, whether you’re applying for a credit card, auto loan or mortgage.

“2019 was a cautious year in the credit card industry, and 2020 is starting the same way,” says Ted Rossman, industry analyst at Bankrate. “Even though recession worries have waned in recent months, card issuers are concerned that the economic expansion can’t last forever, and they don’t want to overextend themselves. We’re seeing some pullbacks on approvals and credit limits, along with less generous sign-up bonuses. Lenders will be drawn to the much lower default rates the FICO 10 Suite is promising.”

“Many lenders want to leverage the most comprehensive data possible to make precise lending decisions,” Jim Wehmann, executive vice president for Scores at FICO, said in a press release. “By offering a score that taps further into trended data, we’re able to give lenders greater flexibility and predictive power, as well as ease of integration.”

Traditionally, many lenders have relied on a static credit score — sort of a snapshot — when they measure a consumer’s creditworthiness. Trended data, on the other hand, paints a fuller picture over a longer period of time.

According to FICO, the new FICO Score Suite will be available through credit reporting agencies beginning this summer and scores tailored for specific industries will also be available.

The details

The new FICO Suite is designed to help lenders better assess credit risk and prevent consumers from taking on loans or credit cards that may not align with their creditworthiness.

FICO Score 10 is similar to FICO’s current model, FICO 9. FICO 10 will make integration easiest for lenders looking to convert to the new Suite. FICO Score 10T, on the other hand, takes trended data from the credit bureaus into account. That means your history of credit use, like your account balances for the past year, will be considered in your credit score.

“FICO 10T will incorporate trended data, which basically means that they’re going to try to smooth out the peaks and valleys,” Rossman says. “A temporary spending spike such as a vacation or holiday shopping won’t hurt your credit score as much if you generally keep your credit utilization low.”

The other side of using trended data, though, is that if you fall behind on payments or begin to accumulate more debt, your score could be impacted negatively.

Unlike current models that generally account for the most recent month’s data alone, lenders using FICO 10T will gain a bigger picture view of your relationship with credit and historical ability to make payments.

The new model is also in contrast with recent products like UltraFICO[2] and Experian Boost[3], which are designed to help consumers quickly boost their credit scores and qualify for more loans by incorporating nontraditional information like utility payments and banking history.

“Ultimately, though, change comes slowly in credit monitoring,” Rossman says. “The most-used formula is still FICO 8, which came out in 2009. Rather than getting too hung up on which model a particular lender is using, consumers should practice fundamental good habits such as paying their bills on time and keeping their debts low.”

1 2