topic Re: FICO Changes Could Lower Your Credit Score in Credit in the News

FICO 10/10T Changes Could Lower Your Credit Score

Rebuild2019 — Mon, 27 Jan 2020 22:14:00 GMT

https://apple.news/ApRm08ggITm6pU-oA7aEBMA

Interesting reading.

Re: FICO Changes Could Lower Your Credit Score

greg_the_egg — Thu, 23 Jan 2020 12:45:47 GMT

I believe the most important part is this:

"Unlike previous FICO scores, 10 T will assess how consumers’ debt levels have changed during the past two or so years. FICO scores so far have reflected consumers’ balances during roughly the most recent month tracked. This change will place more weight on rising debt levels. Consumers who previously paid their credit-card bills in full but shift to carrying growing balances for several months will likely end up with a lower score. On the other hand, consumers who tend to increase card debt during a specific month each year and then pay it off quickly will likely experience a smaller drop in their score than they currently do."

I've seen "consumer finance accounts" as a negative indicator, but now it appears that it will carry even more weight than it has before. Where you could previously (and currently until new version is implemented) move credit cardf debt to a personal loan for a boost, that will likely no longer be the case. Also, in regards to a consumer shifting to increasing card balances over time, I'm curious as to how the utilization plays into that. For me, I tend to carry 1 - 3 %, but when I receive additional 0% APR promo offers, my balances increase to just under the 8.9% threshold, but sometimes a little higher if I know I won't be applying for credit anytime soon.

Re: FICO Changes Could Lower Your Credit Score

Anonymous — Thu, 23 Jan 2020 13:06:26 GMT

@greg_the_egg wrote:
I believe the most important part is this:

"Unlike previous FICO scores, 10 T will assess how consumers’ debt levels have changed during the past two or so years. FICO scores so far have reflected consumers’ balances during roughly the most recent month tracked. This change will place more weight on rising debt levels. Consumers who previously paid their credit-card bills in full but shift to carrying growing balances for several months will likely end up with a lower score. On the other hand, consumers who tend to increase card debt during a specific month each year and then pay it off quickly will likely experience a smaller drop in their score than they currently do."

I've seen "consumer finance accounts" as a negative indicator, but now it appears that it will carry even more weight than it has before. Where you could previously (and currently until new version is implemented) move credit cardf debt to a personal loan for a boost, that will likely no longer be the case. Also, in regards to a consumer shifting to increasing card balances over time, I'm curious as to how the utilization plays into that. For me, I tend to carry 1 - 3 %, but when I receive additional 0% APR promo offers, my balances increase to just under the 8.9% threshold, but sometimes a little higher if I know I won't be applying for credit anytime soon.

Not happy! Good information and write up.

Gives us some lead time to be aware and potentially take some form of action if so required!

Re: FICO Changes Could Lower Your Credit Score

GApeachy — Thu, 23 Jan 2020 13:33:51 GMT

https://www.forbes.com/sites/lisettevoytko/2020/01/23/report-fico-credit-score-adjustments-could-hurt-consumers-with-growing-debt/

I couldn't read the whole article due to no subscription but found this if interested.

Re: FICO Changes Could Lower Your Credit Score

Rebuild2019 — Thu, 23 Jan 2020 13:37:09 GMT

Thanks @GApeachy

Re: FICO Changes Could Lower Your Credit Score

GApeachy — Thu, 23 Jan 2020 13:39:31 GMT

No, thank you. I was wondering when 10 might roll out, or was in the works.

Re: FICO Changes Could Lower Your Credit Score

Andypanda — Thu, 23 Jan 2020 15:36:30 GMT

@GApeachy wrote:
No, thank you. I was wondering when 10 might roll out, or was in the works.

Even after it is released, it might be a while after that before lenders start actually start using it. Many lenders still use fico 8 when 9 has already been released.

Re: FICO Changes Could Lower Your Credit Score

dynamicvb — Thu, 23 Jan 2020 15:37:07 GMT

I just read this on another site and was going to post it. Seems like utilization may start to have some memory from the way I read this article.

https://www.wsj.com/articles/fico-changes-could-lower-your-credit-score-11579780800

Re: FICO Changes Could Lower Your Credit Score

Anonymous — Thu, 23 Jan 2020 16:09:17 GMT

@Andypanda wrote:
@GApeachy wrote:
No, thank you. I was wondering when 10 might roll out, or was in the works.
Even after it is released, it might be a while after that before lenders start actually start using it. Many lenders still use fico 8 when 9 has already been released.

And this begs the question: When do these flavors of FICO scores become the new "gold standard"?

As it stands now, FICO 8 is still the mainstream score when one thinks FICO scores. It's score that will be referenced for most card or personal loan decisions. It's the score prominently provided by most paid monitoring services. This despite the more recent FICO 9 flavor that was developed. That version still seems to have a more niche following by lenders.

What will drive the change away from FICO 8 being the standard? Is is simply lender adaption that drives this?

Re: FICO Changes Could Lower Your Credit Score

Anonymous — Thu, 23 Jan 2020 16:09:19 GMT

"FICO for the first time will place more weight on personal loans in a way that penalizes some borrowers. For example, consumers who transfer credit-card debt to a personal loan but continue to rack up credit-card balances will likely experience a bigger drop in their credit scores."

@greg_the_egg's post has the most important paragraph, I think. (Different from the one above.)

So the 'T' in 'FICO 10 T' is for 'Trended Data'.

Re: FICO Changes Could Lower Your Credit Score

Anonymous — Thu, 23 Jan 2020 16:13:41 GMT

@GApeachy wrote:
https://www.forbes.com/sites/lisettevoytko/2020/01/23/report-fico-credit-score-adjustments-could-hurt-consumers-with-growing-debt/

I couldn't read the whole article due to no subscription but found this if interested.

Thanks for the readable story on the new FICO 10 T Scoring System

Re: FICO Changes Could Lower Your Credit Score

Anonymous — Thu, 23 Jan 2020 16:34:01 GMT

https://www.cnbc.com/2020/01/23/fico-10-credit-score-changes.html

I don't see many banks jumping to switch to this model since implementing it cost them money but this new scoring model could drive so many people over the financial edge.

Re: FICO Changes Could Lower Your Credit Score

cr101 — Thu, 23 Jan 2020 16:38:13 GMT

It doesn't say when it starts. Any idea when?

Launch of FICO 10

Anonymous — Thu, 23 Jan 2020 18:14:19 GMT

Edit: I was informed there was a discussion created for this that started earlier today before this thread in the Credit News section of these forums. Here is a link: https://ficoforums.myfico.com/t5/Credit-in-the-News/FICO-Changes-Could-Lower-Your-Credit-Score/td-p/5888741

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Hi everyone. I did a search in the forums and didn't see any posts about FICO 10. I just read this article which touches on some of the coming changes.

https://www.cnbc.com/2020/01/23/fico-10-credit-score-changes.html

Key quotes:

"Fair Isaac Corp., the company behind the popular FICO credit score, announced the launch of its latest FICO 10 model today, Jan. 23, that will start incorporating consumers’ debt levels into their scoring model."

"FICO estimates that about 110 million consumers will see a change to their score under the new credit score model, with most people seeing less than a 20 point swing in either direction. Roughly 40 million will see a shift upward over 20 points and another 40 million will see a shift downward, FICO says."

"“Those consumers with recent delinquency or high utilization are likely going to see a downward shift and depending on the severity and recency of the delinquency it could be significant,” Dave Shellenberger, FICO vice president of product management, said in a statement."

"The new scoring model will also likely create a wider gap between those who are considered good credit risks and those who are not. Consumers who already have good credit, for example, and who continue to whittle down their already existing loans and make on-time payments will see higher scores. But those who score below 600 will see bigger dips in their scores under the new model."

Re: FICO Changes Could Lower Your Credit Score

Anonymous — Thu, 23 Jan 2020 17:12:37 GMT

Here's a version of the WSJ article that is not (yet) behind the paywall: https://www.wsj.com/articles/fico-changes-could-lower-your-credit-score-11579780800

Re: Launch of FICO 10

thornback — Thu, 23 Jan 2020 17:14:02 GMT

Interesting.... And this tidbit:

"FICO also plans to flag consumers who sign up for personal loans, which are generally considered more risky since these are unsecured and typically do not require collateral like a car or a house."

Wonder if/how that may relate to unsecured student loans.

Re: Launch of FICO 10

Anonymous — Thu, 23 Jan 2020 17:15:27 GMT

This should be interesting, I wonder when we will start seeing these scores on myFICO.

Re: Launch of FICO 10

simplynoir — Thu, 23 Jan 2020 17:25:33 GMT

Already being discussed here

https://ficoforums.myfico.com/t5/Credit-in-the-News/FICO-Changes-Could-Lower-Your-Credit-Score/td-p/5888741

Re: FICO Changes Could Lower Your Credit Score

iced — Thu, 23 Jan 2020 17:45:06 GMT

@Anonymous wrote:
https://www.cnbc.com/2020/01/23/fico-10-credit-score-changes.html

I don't see many banks jumping to switch to this model since implementing it cost them money but this new scoring model could drive so many people over the financial edge.

How does this cost banks money or drive people over the financial edge?

The way I read this, as one person put, is that utilization will have a memory under the new model. People already spending themselves into oblivion will continue to do so; it's just that lenders might get a bit more of a warning without having to have had historical data on that user on-hand already. If anything, this might save them money in the long-term, and the banks that cater to higher-risk people in return for higher interest rates...well, I suspect they'll just keep on doing that regardless of this new score.

Re: FICO Changes Could Lower Your Credit Score

Anonymous — Thu, 23 Jan 2020 17:51:25 GMT

I’m sure we will find out when it starts. MyFICO peeps will be all over it.