Home > Credit Score > A New FICO Credit Score Is On Its Way

Comments 5 Comments

Update: August 18, 2014 Read About The New FICO 9 Scoring Model Here

FICO announced Wednesday it would release its latest credit scoring model, called FICO Score 9, this summer. As with all credit scoring formulas, the idea is for this FICO Score 9 to be the best indication of consumers’ creditworthiness.

Credit scores are predictive models that help lenders decide whether or not to approve a borrower for credit. To simplify what’s really a much more complicated formula: Credit scores are numbers that represent your credit history, and how high or low those numbers are tell a lender how likely you are to repay the loan on time and in full. As the lending landscape changes, like it has in the past several years, a new formula may be more useful to lenders than existing ones.

“The lending marketplace has changed dramatically in the last few years,” said Anthony Sprauve, senior consumer credit specialist for FICO. “It’s become a lot more complicated to evaluate a consumer’s risk.”

What Goes Into Making Credit Scores

There are a ton of different credit scores out there. Some are used by lenders, others are for educational purposes, and each one weighs various aspects of your credit history differently.

The last time FICO released a new scoring model was in 2008 (FICO Score 8), but a new scoring model involves a lot more than a release date. The development of new scores takes years of building a better broad-based model from scratch, allowing lenders to adopt it and also releasing an entire suite of product-specific scores (there are FICO scores for auto loans, mortgages, student loans and so on).

Getting the new score out into the marketplace takes a while, too, said Barry Paperno, who has worked in the credit industry for more than two decades. He described it like the release of new software. When a new version of a program or the latest smartphone comes out, not everyone rushes to replace what they have. There are a lot of things to weigh in such a decision, like if the cost of adopting new technology will be a significant improvement over what you’re working with at the moment.

With credit scores, it’s more complicated than getting a new iPhone.

“These scores are embedded in their systems pretty deeply,” Paperno said. “It’s a pretty disruptive process. This is where the validation comes in.”

By validation he means the lenders will try out the scores on a segment of their portfolios, to see if the new model is truly more predictive than the model they’re currently using. It’s a slow process, and not everyone goes with the latest model released about every 5 years (much like not everyone gets the newest generation of iPhone — people often keep what works until it doesn’t).

What New Scores Mean for You

If the idea is for credit scores to help lenders make better decisions, you may be wondering what this new model means for you as a consumer. Frederic Huynh, a senior principal scientist for FICO, said new models tend to more definitively separate responsible credit consumers from the irresponsible. The score range stays the same (300 to 850), and the tiers within them stay the same (excellent, good, fair, etc.), but where you fall may change.

“Most of the consumers out there are responsible,” said Huynh. “Most consumers tend to score higher when we have new scores.” The reciprocal idea, of course, is that so-called irresponsible consumers may end up with lower scores with a new model.

Huyng also noted that while FICO supports the idea of scoring more consumers, FICO Score 9 sticks to the same parameters as the FICO Score 8. In order for consumers to be scored, they must have at least one trade line on their credit reports that is at least six months old, and they must have at least one trade line that has been updated within the last six months. Other scoring models reach further back into a consumer’s credit history and therefore score more people. The VantageScore 3.0 formula, for instance, goes back two years.

Huyng said more details about the new score will come out as the release gets closer. If you want to see where your credit currently stands, the Credit Report Card will show you two of your credit scores, including your VantageScore 3.0, and an overview of your credit — for free.

More on Credit Reports and Credit Scores:

Image: Zoonar

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • http://www.ovlg.com/blog/author/stacy/ Stacy Barbee

    I don’t find anything new in the FICO score 9. They are using the same parameters only. The score range is also the same. Hopefully, we will get a clear idea once they give more details about the FICO Score 9. I hope the new score model will be good for both the lenders and consumers.

    I was reading an article in marketwatch. According to them, “FICO
    Score 9 will provide best-in-class predictive power across all major
    credit product lines – mortgages, auto loans, credit cards and
    personal loans – from originations through account management.”
    Let’s see how the new scoring model will help to achieve that. Let’s wait till the summer.

  • thoughtfulY

    Who cares what these financial criminals do with the unconstitutional credit scores. Cut up your credit cards and pay for everything in cash.

  • Jack

    I’ve already scored a perfect 850 on the non-industry specific FICO 08 scoring model, and come withing 1-2 points of the max (which isn’t 850) on the similar FICO 04 models. My FICO Classic ’98 score was within 6 points of the max (again, 850 wasn’t the max). Interesting trend for what’s supposedly an improved scoring model each time, especially when one sees how lenient they’ve become in forgiving certain negative credit items in consumer profiles. Vantage Score 3.0 is another example of this trend.

    I’m not alone in seeing my scores jump, as each newer scoring model has allowed most consumers to score higher than the previous model, while lending score thresholds stay the same for approval and interest rate determination. Anyone can see that allows more loans to qualify, and that seems to be the underlying objective of each new scoring model, rather than “improving” scoring effectiveness in predicting loan repayment risk. Is this because large financial institutions, knowing they are “too big to fail” per se, now perceive there’s no REAL risk for them to go under since the government will intervene when things get ugly, and pour capital into their coffers? One wonders…

    With millions of consumers’ credit trashed in the financial meltdown the past few years, I expect the trend to continue. I don’t see that as a positive development with regard to truly gauging individual loan risk. I view it as just another symptom of an ill financial industry addicted to maximizing loan approvals.

    • Thomaso Williamo Startupo

      Good job, Jack!

    • Time To Fish

      Get a life dude..

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team