What a New FICO Score Means to Everyone
Analytics firm FICO’s flagship FICO Score, the FICO Score 10 Suite, will be available this summer. It changes the way potential creditors will view your credit-worthiness, so the changes in FICO 10 are worth noting:
The new FICO Score 10 Suite gives is designed to give lenders flexibility and predictive power to make more precise lending decisions. The new FICO Score 10 T incorporates trended credit bureau data to further enhance predictive power.
Leveraging the most comprehensive data available, FICO Score 10 and FICO Score 10 T outperform all previous FICO Scores.
By adopting the FICO Score 10 Suite, a lender could reduce the number of defaults in their portfolio by as much as ten percent among newly originated bankcards and nine percent among newly originated auto loans, compared to using FICO Score 9.
The reduction in defaults is even higher for newly originated mortgage loans, at 17 percent compared to the version of the FICO Score used in that industry.
These improvements in predictive power can help lenders safely avoid unexpected credit risk and better control default rates, while making more competitive credit offers to more consumers.
Delivering Increased Predictive Power
FICO Score 10 delivers increased predictive power, while preserving the trusted and proven FICO Score minimum scoring criteria.
Plus, FICO Score 10’s backward compatibility to previous FICO Score versions ensures continuity, ease of use and stability for lenders and investors. Lenders can more easily transition to FICO Score 10 since it includes standard FICO reason codes, a similar odds-to-score relationship as prior versions and consistent score ranges.
Driving Precision and Flexibility with Trended Data
To further enhance predictive power, FICO Score 10 T incorporates trended credit bureau data. Different than traditional credit bureau data, the use of trended data considers a historical view of data such as account balances for the previous 24+ months, giving lenders more insight into how individuals are managing their credit.
The FICO Score is the independent standard measure of consumer credit risk used by lenders in more than 90 percent of all consumer credit decisions in the US and is provided free to consumers through hundreds of lenders via the FICO® Score Open Access Program.
25 of the largest credit card issuers, 25 of the largest auto lenders and tens of thousands of other businesses rely on the FICO Score for their consumer credit risk analysis and federal regulatory compliance.
FICO Score 10 and 10 T provide a precise assessment of consumer credit risk on all credit product lines – mortgages, auto loans, credit cards and personal loans – and can be used across the entire customer credit lifecycle, starting with marketing/pre-screen, originations and account management, all the way through early-stage collections.
The new FICO Score Suite will be available to lenders through the U.S. credit reporting agencies starting this summer. FICO will also offer industry-tailored scores in the FICO Score 10 Suite.
Main Takeway for Consumers: the new FICO 10 will pay special attention to trends in your credit usage.
This means it’s more important than ever to stay on top of your credit accounts. Among other things, this means you should pay bills on time, and pay off credit cards in full every time you can.
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