FICO 9 Doesn't Like Student Loan Debt

[Anonymous]

While comparing 8 to 9, I found that student loans if unpaid but current lower your score. While on the 8 and previous models these lines of credit helped. Why the change? That makes it extremely difficult for those in school or just getting out and making payments to obtain loans and etc when you've dropped the score by almost 100 points.

[Anonymous]

Glad you brought this finding to the forefront. There is little information floating around on Fico 09 so this is an early "heads up". The idea of dropping another pressure on students using loans seems unnecessary. Hope others can chime in?

[Anonymous]

Hello kittarikai1 and welcome to the Forums.

It sounds like you are describing one of two possible things:

(1)  You have been following both your FICO 8 and 9 scores both for at least 4 months.  (You have at least two full quarterly reports from myFICO.)  For a while you had no student loans on your reports.  Suddenly a lot of student debt has just appeared.  At the same time that the student debt appeared, your FICO 9's dropped but your 8's did not.

(2)  You have been following FICO 8 for a while.  You have also had a lot of student debt on your reports for quite some time.  You have just started getting your FICO 9 scores and you see that they are much lower.  You are guessing that the FICO 9 scores are lower because of the student loans.

Which is closer to your situation?

Also, can you describe the difference between the amount owed and the original amount of the loan for the student loans?  I am guessing that you owe more than the original amount, due to the loans being in deferment, but just wanted to confirm.

If you are right that the FICO 9 model is sharply penalizing student debt where the borrower owes more than 99% of the amount originally borrowed, that may be the result of actual statistical data from the last 7 years (during which time the model was developed).  During that time (post the financial meltdown of 2008) it is probably true that graduating students with a lot of debt revealed a high chance of risk as they defaulted.  The good news may be that that FICO 9 might lower that penalty once a person shows a perfect payment history of X number of months and also lowers the total debt to under 98% (that's a number I am grabbing out of the air, it could be higher or lower).  I don't know that to be true, but it would make sense for the model developers to relieve the penalty in a way like that.

Can you tell us what your FICO 8 scores vs. your FICO 9 scores?

A final thought.  You seem to be worried that your FICO 9 scores will make it hard for you to get a loan (perhaps a car loan say) in the next year.  That strikes me as unlikely, since few lenders are using FICO 9 yet.  Still FICO 9 will eventually begin to be adopted so you are smart to be interested in it.