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FICO 10/10T Changes Could Lower Your Credit Score

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Regular Contributor

Re: Launch of FICO 10


@simplynoir wrote:

Already being discussed here

 

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


Thank you for pointing this out. My apologies for any duplicate content!


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Message 21 of 118
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Frequent Contributor

Re: Launch of FICO 10

Who's to say they will even use this new model much? Fico 9 has been out but most use 8 still, and 2/4/5



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Message 22 of 118
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Super Contributor

Re: Launch of FICO 10


@Nomad3 wrote:
Who's to say they will even use this new model much? Fico 9 has been out but most use 8 still, and 2/4/5

FICO 2/4/5 Smiley Frustrated

I have one CU that still uses FICO2 for CC's. and I think there are a few other CU's still using it to.

 

Message 23 of 118
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Senior Contributor

Re: Launch of FICO 10

"The new model is also in contrast with recent products like UltraFICO and Experian Boost, which are designed to help consumers quickly boost their credit scores and qualify for more loans by incorporating nontraditional information like utility payments and banking history."

 

eta: https://www.bankrate.com/finance/credit-cards/new-fico-score-10-suite-changes-to-credit-score/

 

Boost seemed weird to me, idk.

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Message 24 of 118
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Senior Contributor

Re: FICO Changes Could Lower Your Credit Score


@CassieCard wrote:

"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'.


Like vacation?  

“FICO 10T will incorporate trended data, which basically means that they’re going to try to smooth out the peaks and valleys,” Rossman says. “A temporary spending spike such as a vacation or holiday shopping won’t hurt your credit score as much if you generally keep your credit utilization low.”

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Message 25 of 118
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Valued Contributor

Re: FICO Changes Could Lower Your Credit Score


@GApeachy wrote:

@CassieCard wrote:

"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'.


Like vacation?  

“FICO 10T will incorporate trended data, which basically means that they’re going to try to smooth out the peaks and valleys,” Rossman says. “A temporary spending spike such as a vacation or holiday shopping won’t hurt your credit score as much if you generally keep your credit utilization low.”


That's how I read it too. The system sounds like it's being designed to punish those who leverage their already-leveraged debt by living from low-interest BT/loan to low-interest BT/loan, continually shifting debt around without ever really reducing their actual debt load.

Message 26 of 118
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Valued Contributor

Re: FICO Changes Could Lower Your Credit Score

Well that's good to know, I was worried that they were going to penalize people who've let a balance report for a few months.

 

When looking at my past reports, their have been rather large peaks and valleys. Where I'll go months with no balances, then all of a sudden I've got a large one for a few months. Then back to none again. 

 

I wonder though if they'll track balances that aren't reported, such as when you PIF prior to statement cut date?






Message 27 of 118
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Moderator Emeritus

Re: FICO Changes Could Lower Your Credit Score


@iced wrote:

@rgninja 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.


Driving people over the financial edge not sure what's that is in reference too.

 

As far as costing banks money: not to switch no; I literally worked at a subprime lender where the captain of the pirate ship was talking to Experian folks in a meeting at 2 pm, by 3 pm he dictated the switch to FICO 8, and before 5 pm we had the change made, pushed, and were underwriting loans that very day using the new algorithm.

 

That said, most larger banks will trial the version for a WHILE, sometimes months or even measured in years (hi Chase) before they make a decision one way or the other and they will setup trials against their older data sets and see if the new algorithm wound up being a better predictor.  

 

That said I think this new version will be hard to do that one because the old report data didn't really have trended data fully but if Amex et. al kept their monthly AR pulls around they might be able to still do it.  

 

This is a big change, I didn't see where CFA's were going to be more harshly penalized unless someone is using that as a synonym for personal loans in general, but it's going to be interesting to see how personal loans having more weight in general will be.  On the flipside reindeer games might even be of more value depending how they calculate it, but maybe not too if they're looking for trended data.  

 

It's really too early to say but I'll simply point out that what's considered a pretty file under all prior FICO versions, almost certainly will be the same under the current version... we preach PIF and everyone who does that will be fine, and people with decreasing debt loads will probably get a small boost actually if I'm reading it right so it's probably a good thing for almost every reader of this forum; however, we're a seriously small fraction of the total population.




        
Message 28 of 118
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Moderator

Re: FICO Changes Could Lower Your Credit Score

Really irrelevant for myself 780, 800 is the same, besides by the time the industry adopts this model odds are I will not be here. The industry is still largely using Fico 4 and 8, have not even moved to Fico 9 yet.

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Message 29 of 118
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Established Contributor

Re: FICO Changes Could Lower Your Credit Score

I love how myFICO peeps are on top of this "breaking news."

 

 



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