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 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, we have redeveloped the scoring formula several times to make sure it remains a robust predictor of risk. We also make sure the formula keeps pace with changing consumer credit behaviors, includes our newest analytic technology and is adjusted for data reporting enhancements.
FICO releases these new versions to the market and each lender then determines if and when they will upgrade to the latest 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 versions of the FICO Score.
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 all have a similar underlying foundation, and they all effectively identify higher risk from lower risk people. Every time the 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 granting decisions.
What FICO Score version is available at myFICO?
All of the products at myFICO incorporate FICO Score 8, which is the FICO Score version that is most widely used by lenders today.
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 person's 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.
The Score That Matters®
FICO Scores are the standard credit score in the US, used in more than 90% of lending decisions.