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FICO 10/10T Changes Could Lower Your Credit Score

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CreditInspired
Community Leader
Super Contributor

Re: FICO Changes Could Lower Your Credit Score


@iced wrote:

@Anonymous wrote:


What I mean by costing them money is having to train and implement new underwriting standards is all.

OK, I can see that costing them some.

 


@Anonymous wrote:

As for how this could drive someone over a financial edge. You get a bank that decides you are a risk, closes your accounts or balance chases. Your scores are going to tank since even if you are paying your bills all Fico sees is maxed out cards. Now you are in a position of being a high risk even though you are paying your bills on time and you have no cushion should an emergency happen since your credit tanked. Let's be honest most people don't PIF and don't have the means to pay off a card that been closed. This reeks of 2008 all over again since I was reading recently about jumbo mortgage defaults on the rise.


The definition of risk is being on the edge. Making regular payments without reducing the balances over time is treading water, and a person treading water is already a high risk to default as anything from AA to a job change/loss to an unexpected expense would be enough to knock that person over said edge.


^^^ this


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Message 71 of 216
CreditInspired
Community Leader
Super Contributor

Re: FICO Changes Could Lower Your Credit Score


@Medic981 wrote:

@Anonymous wrote:

I think I'll stick with the tried and true, pay my bills on time, PIF on CCs, don't open unnecessary accounts, pay cash instead of swiping, and keep my utilazation under 10% when I do have to carry a balance. It's boring but darn near bulletproof to keep your score high.


How about only swipe if you have the cash to pay for it? I like the bonuses and perks I receive for swiping. Just make sure that interest paid on credit cards isn't more than the perks that you receive. 

 

Utilization has to do with available credit whether you PIF or carry a balance. Most would agree you need to keep your UTI under 8.99% to continue to receive the FICO scoring bonus, however, who knows with the FICO score 10 and 10 T models. 


+1


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Message 72 of 216
CreditInspired
Community Leader
Super Contributor

Re: FICO Changes Could Lower Your Credit Score


@Subexistence wrote:
Does personal loan include SSL? If so, a lot myfico members like myself would take a hit.

I'm thinking no since it's secured debt vs. non-secured debt.


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Message 73 of 216
M_Smart007
Legendary Contributor

Re: FICO Changes Could Lower Your Credit Score


@CreditInspired wrote:

@Subexistence wrote:
Does personal loan include SSL? If so, a lot myfico members like myself would take a hit.

I'm thinking no since it's secured debt vs. non-secured debt.


I think by the time FICO10 rolls out, My SSL will be long gone. 2024

Message 74 of 216
M_Smart007
Legendary Contributor

Re: FICO Changes Could Lower Your Credit Score


@Revelate wrote:

@Anonymous wrote:

@Subexistence wrote:
Does personal loan include SSL? If so, a lot myfico members like myself would take a hit.

SSL is a secured loan, it's doubtful this will be seen as a negative. 


Not all such loans report as secured.  Hard to say TBH.

 

I had two more thoughts about FICO 10:

 

1) Trended data makes all sorts of sense, personal loan questions aside, we might not have to AZEO anymore as it's pretty simple to tell who the transactors are when it's obvious we're PIFing with balance = payment month after month.

 

2) I strongly suspect there may be a significant move towards this from a risk analysis perspective, and it just might be the first one that the GSE's seriously look at because they've grumbled in the past about scoring being somewhat manipulatable... and this new version quite possibly will have the least distortion from FICO strategists and the least punishing to people who don't know (the vast majority).

 

If the GSE's move, the mortgage tiers might move too.  This would be F'n huge, though FICO is suggesting the average is going to be a wash so we'll see.

 

It's really too early to tell frankly how this is going to all play out but I'm pretty sure it's not going to suck for people on this forum other than people who are just debt shuffling on repeated 0% cards without making any progress... and that is a dangerous game to play given 0% offers might suddenly dry up anyway.


"Not all such loans report as secured. Hard to say TBH".

 

+1

 

Message 75 of 216
Remedios
Credit Mentor

Re: FICO Changes Could Lower Your Credit Score

If "secured" loans wont "count", neither should secured cards. Chance of that happening...slim to none.

Another thing, trended data is already provided by some lenders.
Looking at my annual CR, US Bank reported balances but also payments during each cycle.
Chase does not provide it, so my chase accounts are string of $0.00 because they were paid to 0 within a day or so from statement date.

Success or failure of TD will hinge on lenders ability and willingness to provide it.
While on surface it might make sense for then, why lose interest paying customer.
Or conversely, why gain one that's not going to make you much money.

Also, once CR is obtained, lender's own algorithm dates data and "interprets" it according to their own internal scoring criteria.
FICO 8 or FICO 35, it's still just a number.
I'll worry about it if/when it gains some traction.
Until then, sky is still above. It didn't fall.
Message 76 of 216
Revelate
Moderator Emeritus

Re: FICO Changes Could Lower Your Credit Score


@Anonymous wrote:
It’s also worth noting that version 10T seems to be an option like an industry option that will be more costly. It will not be the classic version. Apparently.

I don't think it will wind up costing more anyway.

 

The bureaus don't care about what score you're pulling (nor does FICO to my knowledge) it's just a flavor calculated on a dataset.  One pull is the same as another if they're using one score is my understanding though that is all tied up contractually in the agreement between lender and bureau and pricing does vary.

 

It's interesting though, I didn't quite know why they changed the nomenclature I was assuming this was going to be the new Classic score TBH.




        
Message 77 of 216
Revelate
Moderator Emeritus

Re: FICO Changes Could Lower Your Credit Score


@IFtkkdx428 wrote:

Any home lending is done with FICO 9. All financial institutions use more than one model typically. However, FICO 9 is required for Fannie and Freddie purposesAlso you better guarantee that lenders will use FICO 10. As soon as Fannie and Freddie requires it, everyone will use it. This is specifically for home lending. The going is good in retail lending but once things change, everyone will be using FICO 10 as they should or that lender will be making terrible lending decisions and your hard earned tax dollars will be bailing them out.

This is not correct.  As an aside why would the adoption of a new algorithm produce worse lending results?  That's why there's a slow adoption usually because they're going to check and make *sure* before they switch for their specific consumer underwriting.

 

Back on topic, 99.99% of the mortgages in the United States are *still* underwritten on what's now called EQ FICO 5, TU FICO 4, EX FICO 2.  

 

According to some news piece I saw, the GSE's looked at FICO 9 and dismissed it claiming: "we're happy where we're at from an underwriting perspective."

 

You are correct in saying, which I tried to suggest: if the GSE's switch (Fannie / Freddie) the current mortgage scores are going to be gone, overnight basically throughout the industry.  It'd be a huge win for FICO if they got it, and probably would be a win for the GSE's and might even be a win for the consumers.  Good financial habits should produce better results on this version.

 

As for the FI's pushing products to insure people are paying origination fees and interest, well that's marketing for you same as any other company really just arguably banks have an outsized effect on our lives compared to late-night Snuggie marketing or whatever.  

 

Anyway lenders have probably been asking for this for years, wasn't lost on me that VS 4 (Vantage often leads FICO in terms of innovation) switched and finally made non-trivial inroads with a major lender.  I suspect this score will be much larger than FICO 9 which appears to have been designed (as near as I can tell) in response to the lenders figuring the mortgage crisis was a one-off and they didn't think issues were that relevant on personal histories if all the recent data was good.  Not many people switched though, but FICO 10T: it's a big change and even Chase et. al. will look at it and see if it's cheaper for them to write it into their internal algorithms or buy off the shelf.

 

We'll see: just because l know lenders can switch what algorithm they're using quickly (it's a very small software change) most of them won't historically speaking, and the GSE's haven't in more than a decade so they'll be slow slow slow as usual. 




        
Message 78 of 216
Revelate
Moderator Emeritus

Re: FICO Changes Could Lower Your Credit Score


@Remedios wrote:


Another thing, trended data is already provided by some lenders.
Looking at my annual CR, US Bank reported balances but also payments during each cycle.
Chase does not provide it, so my chase accounts are string of $0.00 because they were paid to 0 within a day or so from statement date.

Success or failure of TD will hinge on lenders ability and willingness to provide it.
While on surface it might make sense for then, why lose interest paying customer.
Or conversely, why gain one that's not going to make you much money.


Usually data reports are in the contract between lender and bureau.  Effectively to get the data and sometimes scores, you must furnish the data.  I suspect this was an optional field before in the API's, it could be made mandatory.

 

Chase actually  used to report the trended data; it wouldn't surprise me if they could be brought back into the fold.




        
Message 79 of 216
Remedios
Credit Mentor

Re: FICO Changes Could Lower Your Credit Score

I'd welcome use of TD.
It would help with my balance reporting neurosis lol
Message 80 of 216
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