A look at FICO® Score 8 and why there are multiple versions of FICO® Scores
Why are there multiple versions of FICO® Scores?
Did you know that FICO® Scores were first introduced to lenders over 25 years ago in 1989? In the time since those first versions of FICO® Scores were used by lenders, there has been quite a bit of change in lender credit granting practices, consumer demand for and use of credit, as well as data reporting practices.
As a result, FICO has redeveloped its scoring models several times to make sure they remain robust predictors of risk. FICO also makes sure new versions of the FICO® Score models keep pace with changing consumer credit behaviors, include FICO's newest analytic technology, and are adjusted for data reporting enhancements.
FICO releases these new FICO® Score versions to the market and each lender then determines if and when it will upgrade to a new version of the score. Some lenders migrate relatively quickly while others can take several years to make the upgrade. As a result, there are lenders currently using different FICO® Score versions.
As an analogy, it is similar to how people or businesses are on different versions of Microsoft Windows or have different generations of a smart phone. All these versions have the same base functionality, but each version also has unique updated features to meet evolving user needs.
The various FICO® Score versions in use today have a similar underlying foundation, and they effectively identify higher risk people from lower risk people. Every time a FICO Score is updated it incorporates unique features, leverages new risk prediction technology, and reflects more recent consumer credit behaviors. The result is a more predictive score that helps lenders make more informed credit decisions.
What FICO® Score versions are available at myFICO?
All FICO® Score products made available on myFICO.com include a FICO® Score 8, the FICO® Score most widely used by lenders, along with additional FICO® Score versions, including prior base FICO® Score versions as well as industry-specific auto and bankcard versions. Learn more
With all FICO® Score versions, the keys to responsibly managing FICO® Scores remain the same:
- Pay bills on time
- Keep credit card balances low
- Open new credit accounts only when needed
How is FICO® Score 8 different from previous versions?
While the underlying foundation of FICO® Score 8 is consistent with previous versions, there are several unique features that make FICO® Score 8 a more predictive score:
High credit card usage
While all FICO® Score versions consider high credit card utilization to be reflective of higher risk, FICO® Score 8 is more sensitive to highly utilized credit cards. So if a credit report shows a high balance close to the card's limit, FICO® Score 8 will likely be more impacted than a previous score version.
Keeping credit card balance low can help maintain or improve the score.
Isolated late payments
If a lender reports to the credit bureau that you were at least 30 days late with your payment, it will likely result in a loss of points with all FICO® Score versions. If the late payment is an isolated event and other accounts are in good standing, FICO® Score 8 is more forgiving compared with previous FICO® Score versions.
However, if the credit report shows numerous late payments, the reverse is true and FICO® Score 8 will likely lose more points.
Authorized user of credit card
All FICO® Score versions include authorized user credit card accounts when calculating a score. This can help people benefit from their shared management of a credit card account. It also helps lenders by providing scores that are based on a full snapshot of the consumer's credit history.
To protect lenders and honest consumers, FICO® Score 8 substantially reduces any benefit of so-called tradeline renting. That's a credit repair practice that entices consumers into being added to a stranger's credit account in order to misrepresent their credit risk to lenders.
Small-balance collections accounts
FICO® Score 8 ignores small-dollar "nuisance" collection accounts in which the original balance was less than $100.