Buzz
Are you confident about your credit score? The introduction of a new scoring model could affect it, but probably not by much. FICO has revealed that it’s launching FICO 10, its newest version of the scoring system used by lenders to determine your credit score.
The update includes two versions: FICO 10 and FICO 10 T. The latter offers a look at your credit behavior over the past two years, factoring in details like your account balances. (This approach is already used by VantageScore 4, its most recent update.) This version is expected to have a more significant impact on your score, providing a broader view of your financial activity instead of just a snapshot.
FICO predicts that around 110 million individuals will experience a change of “less than a 20-point swing” in either direction under the new model, according to CNBC. Consumers with personal loans may see a more noticeable drop, as personal loans are viewed as riskier compared to student loans or those for cars and homes.
You’re more likely to notice a shift in your score if your lender uses FICO 10 T and you’ve had a credit issue—such as a payment that was 30 days late—in the last year.
“They aim to smooth out the highs and lows,” said Ted Rossman, industry analyst at CreditCards.com. “A temporary spike in spending, like for a vacation or holiday shopping, won’t hurt your credit score as much if you generally maintain low credit utilization.”
Matt Schulz, chief industry analyst at CompareCards, emphasized the importance of examining trends over time, even if it feels uncomfortable. “It’s far easier to assess someone’s financial health when you can see how their situation has evolved over several months, rather than viewing each month in isolation. It’s like when your kid asks for the car keys,” he said. “If they’ve been responsible with the car for months without any issues, you’d feel comfortable handing them over. But if they’ve generally done well but have a speeding ticket and missed a few curfews recently, you might hesitate.”
The knowledge that you might be assessed using this updated version could encourage you to pay closer attention to your credit history.
FICO 10 Suite will be accessible to lenders starting this summer, so any changes to your score won’t happen until a lender pulls your credit report using the new version. If you check your FICO score through your bank or credit card issuer, they may use any version they choose to generate your score. For example, Bank of America uses FICO Score 8.
If you're using a free service like Credit Karma, there's a chance you're not even viewing a FICO score—many financial services still rely on VantageScore 3 to calculate credit scores.
Therefore, it’s less crucial to worry about the specific scoring model and version used by lenders, and more important to concentrate on maintaining strong financial habits.
“None of these changes affect the fundamental principles of credit,” Schulz stated. “Good credit still comes down to three key things: paying your bills on time, keeping your balances low, and not applying for too much credit too frequently. Stick to these habits consistently over the years, and your credit will be in great shape.”
