09-01-2014 06:52 AM
It’s not just one score
FICO 9 isn’t just one credit score, but rather a new suite of credit scores. There are now four “flavors” of the FICO score being redeveloped by the company. They are: FICO Auto, FICO Bankcard, FICO Mortgage and a generic FICO score. And because each credit bureau gets their own suite of FICO scores each time it’s redeveloped, FICO 9 means there will be 12 new FICO scores:
4 new scores x 3 credit bureaus = 12 new FICO scores
Residential rental history counts
A few years ago Experian began adding residential rental history to their credit reports. Recently TransUnion announced they’d be doing the same. That’s great news for consumers who have little to no credit history BUT pay their apartment rent on time and want their credit reports to reflect them doing so. All FICO score versions prior to FICO 9 did not consider rental tradelines, even if they were on your credit report. FICO 9 will consider these accounts.
FICO doesn’t determine when FICO 9 will become available
The word on the street is that FICO 9 will be available sometime in the Fall of 2014 or in early 2015. Why the varying release dates? The answer is because FICO doesn’t control when their scores will become commercially available because they don’t sell their own scores. The credit bureaus sell FICO scores. Because the FICO software is installed on the mainframes of the credit bureaus, the bureaus are the ones that will make the score available when they’re ready to do so—not FICO.
Zero balance collections will be ignored, regardless of how they got there
There still seems to be some confusion about when a collection will be ignored by FICO 9. FICO 9 will ignore all collections as long as they have a zero balance. Their press release suggests that all “paid” collections will be ignored. The assumption then became that only paid collections and not settled collections would be ignored, which is incorrect. According to FICO, any collection that has a zero balance will be ignored—regardless of whether it was paid in full or settled. The collection agency
community has to love this as it acts as an incentive to pay or settle your collections.
You’re going to see radical score differences in some cases
Whenever a new FICO score is released it’s expected that your score from the new model will be different than your score from the older models. But, you would also expect them to be very similar. For example, someone who had a FICO score of 780 under FICO 8 would be expected to score slightly higher with FICO 9, and that will happen. But, you will also see consumers with drastic differences in scores from FICO 9 as compared to any of the older score versions. Here is an example:
Joe Consumer has a pristine credit report except for several paid collections that are all less than two years old. Under FICO 8 and all older score versions, Joe would have a very poor score, perhaps even in the 500s. With FICO 9, with the same credit report, Joe could easily score above 800 because all of those collections are being ignored as they’ve been paid. The difference in scores is so radical that it tells a completely different story about the consumer. The older score suggests, “You’d be an idiot to lend this guy any money” while the new score suggests, “Bet the farm on this guy because he’s never going to miss a payment.”
The challenge for FICO is explaining to lenders which of the two scores is actually the “right” score to use for underwriting. They have to say that the newer score is the valid score because it’s their latest and greatest. But that would also suggest that the score the lender has been using for the past however many years was also horribly wrong about that particular consumer’s risk level.
Ignored collections are still on the credit report
Yes, it’s great news that collections that have a zero balance will be ignored. What nobody is talking about, however, is that the collections will still be physically present on the consumer’s credit reports until they’ve hit their seven-year reporting limitations. And while the scoring model will ignore them, lenders certainly don’t have to follow suit. It’s entirely reasonable to expect that lenders will continue to have concerns aboutdebts that have gone to collections, despite being paid or settled. And, they can still hold those against the consumer and deny them credit or saddle them with less advantageous terms.
09-01-2014 08:56 AM
but really I'm just jealous that I don't have a product that people rely on
09-01-2014 10:05 AM
I'm glad to see a system that gives people recognition for taking care of bad debts. Previous FICOs were very unjust to treat unpaid and paid/settled collections exactly the same. If FICO 9 gets adopted, this should be great news for a lot of hardworking rebuilders.
OTOH, to treat paid/settled collections as if they never happened for scoring purposes, assuming the article is accurate, seems totally misleading. I wonder if it will keep a lot of lenders from ever adopting FICO 9. A system like that could lead lots of people to think their credit is golden, only to get rejected for loans and credit cards on manual review of their CRs.
Wonder why they did that? It would make a lot more sense to give credit for paying debts will still sutracting points because the debt ever went to collections.
09-01-2014 07:48 PM
I'm having trouble believing creditors will be pulling FICO 9 scores in the coming months. It took CCC's YEARS to start pulling FICO 08 scores. Are the CCC's that are pulling FICO 08 scores just going to dump the 08 score and start pulling FICO 9 scores in the coming months? I'm not convinced they will. Heck, mortgage lenders are using some really old scores, and they haven't really started to pull FICO 08 scores.
09-01-2014 11:22 PM
Actually this model was released back in March and as Fused stated it could be years before it's used by lender.
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