FICO Has Made New Credit Score Changes – Here’s How To Avoid Lowering Your Own

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The latest FICO score probably won’t go into effect for several years, but it’s always good to be prepared. (iStock)

On January 23, credit rating company FICO introduced two new credit scoring models for lenders and credit bureaus to use by the end of 2020. The latest versions are the most recent since the company has released launched FICO 9 in 2014.

For consumers, it is natural to wonder how these new FICO changes will have an impact on your credit score. Here’s what you need to know.

What changes has FICO credit score made?

What FICO calls the FICO 10 suite includes two new credit scoring models: FICO 10 and FICO 10 T. For the most part, these models take into account the same basic factors of your credit history, but there are some changes. credit score keys to understand.

  • FICO 10: If you miss a payment and it’s overdue for more than 30 days, that late payment will hurt your credit score more with FICO 10 than with previous scoring models. In addition, your credit usage (your credit card debt versus the available credit on your cards) will also have a greater influence on your score. Personal loans can also lower your FICO score.
  • FICO 10T: This scoring model, the first version introduced by the company, includes what is known as trend data. Trend data shows how you’ve handled each of your credit accounts over the past 24 months, including your balances, minimum payment requirements, and actual payments. This information allows lenders to better understand how you manage your money and whether you are reducing or increasing your debt over time.

If you have a low credit rating due to late payments or credit card balances, you would likely see your score drop even further with the new credit scoring models. The same is true if you have struggled to reduce your debt for the past two years.

Finally, if you have used personal loans in the past or are planning to do so in the future for debt consolidation or for any other reason, it could negatively impact your score.

How to Avoid a Lower Credit Score with New FICO Models

If you’re worried about the impact of newer versions of FICO on your credit score, don’t worry too much. The models are currently not available to lenders and credit bureaus, and may not be until the end of 2020. Even then, they might not start using them for several years.

Case in point: FICO 9 was launched in 2014, but many lenders still use the FICO 8 model, which was introduced in 2009.

That said, there’s no way to tell exactly when we’ll start seeing the FICO 10 suite models in action, so it’s always a good idea to prepare yourself with these tips:

  • Pay off credit card debt. High credit card balances are not only bad for your credit score, but also for your financial health. Make it a priority to pay them off to protect your score and save money on interest.
  • Always pay on time. Set a goal to pay your bills on time each month. If you are having financial difficulties, work with your lender to avoid late payments. And if you have overdue accounts, try to make up for it as quickly as possible.
  • Make your credit score a priority. If your credit score is high, you probably won’t see any significant impact from changes in the FICO rating. Take the time now to improve your credit, so you can be ready when lenders start using them.
  • Avoid personal loans in most cases. While you can use personal loan funds for just about anything, it’s best to avoid them. An exception is if you try to consolidate high interest credit card debt. In this case, the savings in interest and the absence of debt can be worth it to your credit score.

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