FICO’s new scoring model, which was announced this past week, will likely lower credit scores for those with a current credit score below 600, as it is based more on the past two years of payments, and it takes personal loans into account. However, those who already have good credit scores, and who continue to whittle away at existing loans, make payments on time, and don’t acquire new balances, will likely see higher scores under the new model.
“We’ve unfortunately found ourselves in an era where it’s becoming commonplace to water down the breadth of information on credit reports,” Ulzheimer says, adding that tax liens, judgments, medical collections and medical debt have all been removed or delayed from some credit scoring models.
“All of this is great for consumers who have tax liens, judgments, and medical collections…but it’s not great for scoring models and their users,” Ulzheimer adds. But he notes the new scoring model is not “consumer unfriendly” either. “People with good credit are going to score higher with newer models. People who have elevated risk are going to score lower.”
Despite the changed scoring model, it may take a while for it to hit your credit report. “Change comes slowly in credit monitoring,” says CreditCards.com’s industry analyst Ted Rossman. “Rather than getting too hung up on which model a particular lender is using, consumers should practice fundamental good habits such as paying their bills on time and keeping their debts low,” Rossman continues.
Of course, ultimately, which model is used will be decided by banks and other lenders. FICO 9, released in August 2014, is still not used across the board. Many lenders still use FICO 8, whick was released in 2009. And still other lenders use VantageScore, which is produced by the credit bureaus Experian, Equifax and TransUnion.