A Look at FICO® 8 Score
As you may have heard, the FICO® 8 credit score debuted in 2009 as the newest generation of the FICO credit score. We created this new formula to significantly enhance the score's ability to predict consumer credit risk. FICO 8 Score is available to lenders from Equifax, Experian and TransUnion. Each of those credit reporting agencies use FICO's scoring formula to assess information in consumer credit reports and calculate FICO 8 Scores.
For perspective, FICO Scores were first introduced to lenders in 1989, more than 20 years ago. Since then the FICO company has redeveloped its 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. And we add in our newest analytic technology and adjust for data reporting enhancements.
It’s natural for scores to shift whenever a scoring system is updated. How much it shifts and in what direction will be unique to each consumer. Our research shows that nearly half of U.S. consumers have updated FICO® Scores that are relatively close to their FICO Scores from the previous version of the formula. It is possible for a greater score change to occur, but this type of movement simply means the updated model is doing a better job of identifying those people who are lower credit risks from those who are higher credit risks.
The actions you can take to manage your FICO 8 Score over time remain the same:
- Pay your bills on time
- Keep credit card balances low
- Open a new credit account only when you need it
What Changed in FICO® 8 Score
Here's a look at what changed the most in creating the FICO 8 Score.
High credit card usage
FICO 8 Score is more sensitive to highly utilized credit cards. So if your credit report shows a high balance close to the card's limit, your score will likely lose more points than it would have previously. You may want to consider keeping any monthly credit card balance low.
Isolated late payments
If a lender reports to the credit bureau that you were at least 30 days late with your payment, your FICO 8 Score will likely lose points. If the late payment is an isolated event and your other accounts are in good standing, the FICO 8 Score is more forgiving compared with scores from previous FICO formulas. However if your credit report shows numerous late payments, the reverse is true and your FICO 8 Score will likely lose more points.
Authorized user of credit card
Every generation of the FICO Score formula has included authorized user credit card accounts when calculating a person's score. FICO 8 Score continues that policy. 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, the FICO 8 formula 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 8 Score ignores small-dollar "nuisance" collection accounts in which the original balance was less than $100.
The Score That Matters®
The FICO Score is the standard credit score in the US, used in more than 90% of lending decisions.