Most people probably have not heard of Fair Isaac Corp., but the company can affect the daily life of anyone who wants to borrow or rent. It’s the company behind the FICO credit score, and it just announced changes to the widely used credit scoring system.
Forbes reports that average FICO scores are at an all-time high, but so is consumer debt, one reason for the updated model.
According to Fair Isaac, the new FICO Score 10 and FICO Score 10 T could give some 40 million Americans a credit bump of 20 points or more. But the new models, which emphasize changes in debt levels and on-time payments in the last two years, could identify more borrowers with not-so-great credit as risky.
So what do consumers need to know?
First, any changes won’t be immediate. The new score versions will be rolled out in summer 2020 and it will likely take lenders some time to switch to using the new models.
Second, the FICO scores are just one model used for credit reporting, and credit is just one factor lenders consider.
Third, the updated model rewards progress toward paying down debt, on-time payments and not maxing out lines of credit, all good goals for consumers to start focusing on now.
Consumer reporters, what else does your audience need to know about this upcoming change?