If you are concerned about your credit score, you’re not alone. Millions of Americans are wondering what will happen when the new FICO 10 scoring model is released this summer. Credit scores are instrumental for so many things in life that you don’t want to mess around and have your credit affected!
So, just what is the new FICO 10 score? Will it impact you? If so, what can you do about it? Let’s take a closer look at the FICO update with a deep dive from your Credit Divas!
How FICO 10 Works
FICO is a scoring method used to provide information about your credit usage and history to lenders. It’s useful in helping lenders predict their risk when providing a loan. Consequently, the scoring model is updated every few years to reflect new data and information that may be relevant to lending practices and trends. For many Americans, the new FICO 10 scoring method could impact their score by ten or twenty points, while others won’t see a significant shift.
In addition to FICO 10, there will also be FICO 10 T, which indicates trending credit data. For some people, this will be a positive score, and it will reflect more negatively for others. Trending data refers to how your credit looks over a period of time in the past. So, for example, if you use your credit cards for large purchases in the summer for vacations, but then you pay them off in the fall, the FICO 10 T will give your score a boost. It will see that your high debt load was only a temporary situation and not indicative of an ongoing trend. However, another person may not do as well with the FICO 10 T because it could show a history of continued borrowing, which could indicate the person is not living within their means.
The FICO 10 model will look at your total debt load and payment history and weigh those more heavily than before when calculating the new score. It won’t be as concerned with such things as student debts or mortgages, although those may play a smaller role. Another thing to keep in mind is that the scoring model will be looking at your debt load over two years versus last month. They will be analyzing your payment habits over a longer period of time to get an idea of what type of borrower you are overall, whereas before the FICO score took just a snapshot of that moment in time. So, a person who was doing well at the moment could skate by on timely payments. It's unfortunate, but it looks like the update is going to be a real kicker for many folks who are struggling to get by and living credit card to credit card.
FICO 10 will continue to report information to the three credit bureaus, namely Experian, TransUnion, and Equifax, and the score range is between 300 on the low end and 850 on the high end.
When Will FICO 10 Begin Affecting Me?
Although the new FICO 10 and FICO 10 T models are expected to roll out sometime this summer, lenders don’t have to adopt them the day they are out. In fact, they usually don’t start using them right away. They may need some time to learn how they work, just like you. Every lending institution is different, so there is no guarantee. However, most people won’t see an impact on their score immediately.
What Can I Do If My Score Goes Down?
If you’re worried about your score being affected, the best time to act is now— before the lenders start implementing the new scoring system! You can repair your credit with the proper help. Working with your Credit Divas at Credit Diva of Dallas will save you money in interest and time in kicking that stress to the curb! Let's get started!