What is FICO 10 score and why should you know about it. Learn from credit experts
What is FICO 10 Score? FICO 10 is the latest, more accurate, and strict version of the previous scoring models. If you are a credit cardholder or planning to calculate your score before applying for a loan, you should understand the latest model first. So, without further ado, let’s dive right into the Fico 10 scoring model and determine its impact on your credit score.
What Is FICO 10 Score Model?
- FICO updates its point model about every five years, as per Dave Shellenberger, Vice President of Product Management at Fico. They analyze and update their algorithms to predict risk accurately. The new credit rating model is calculated based on the user’s account balance over the past 24 months, which is kind of bad news for anyone with a monthly balance.
These changes are expected to widen the gap between those with a good credit score (670 to 739) and those with a bad credit score (less than 580). FICO 10 comes with trending data that will help credit scoring companies even further while lending.
How FICO 10 Models Affect Your Score?
- The new FICO credit rating, released in January 2020, made some surprising headlines warning that 40 million people could lose at least 20 credit score points. It’s scary if you think you’ll be one of them. However, it is unlikely that you will be hit soon, and even so, you have plenty of time to prepare.
It is also worth noting that 40 million users can experience the same rating rise. And 110 million will probably see a difference of fewer than 20 points. Here’s what you need to know about the latest FICO scores.
Use Trended Data to Provide More Accuracy
- The FICO 10 scoring model will continue to use five key factors for evaluation of credit score: payment history, overdue amount, credit history age, new loan portfolio, and new account. However, given this trend, the credit risk assessment will be more accurate.
Trend data, also known as time-series data or reports, show how the loan has been processed over the past 24 months. This allows you to get a more detailed picture of the financial situation at the time.
More Strict Policy
- Under the new FICO 10 scoring model, consumers who miss a payment will have a more intense credit score dropping as compared to the previous one. The only way to improve their position is to pay on time. Otherwise, there is no alternate option in this model.
Good Scores with Bonus Cards
- Consumers with a good credit rating are more likely to score higher with the new version. Anyone with a good credit rating can easily get bonuses like bonus cards. Again, these people have a higher credit rating of 650.
You have to do your best to pay your bills on time, keep your credit balance low and pay your bills in full.
Counts Personal Loans
- In previous versions of FICO, you were authorized to take out personal loans without the fear of lowering your FICO score. Unfortunately, the new FICO 10 model will have a greater impact on personal loans as compared to previous ones.
In most cases, personal loans are used to pay off high-interest credit card debt, so they have a fixed interest rate and a fixed monthly payment. However, paying off your loan and debt consolidation have the greatest impact on your credit rating.
- Sometimes the financial pillars are also updated with credit ratings so you need to plan accordingly and be prepared for change.
Now that you know what is FICO 10 score, If your credit rating is not up to par and you want to modify your credit rating, Credit Repair Today can help you recover your credit score. Credit Repair Today is an authorized credit improvement service that provides consultancy services all across the United States.