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Will my FICO score be affected by the change in credit card interest rates and other things that have happened during the economic downturn?
May 18th, 2010 - Posted by Tasha
Q: Will my FICO score be affected by the change in credit card interest rates and other things that have happened during the economic downturn? It seems that everyone's score is lower now, so is there a new range lenders look at?
A: The method used to calculate a FICO score is cloaked in secrecy, but every now and then this formula is updated. The most recent update, called FICO 8, happened in 2009 and was intended to keep pace with changing consumer credit behaviors. The new formula eased penalties for isolated late payments on credit card balances (this is good), and made the FICO score more sensitive to highly utilized credit cards (not so good, for those that carry high credit card balances month to month). It also included a few other more minor changes.
Fair Issac, the creator of FICO, claims that almost 50% of consumers have scores no more than 20 points higher or lower than their scores from the previous version of their formula. This means that the range of FICO scores nationwide should not have shifted that much. Fair Issac reports the following distribution of FICO scores:
What lenders and creditors chose to do with the FICO range information is up to them. Each lender evaluates credit risk in a different manner, so one lender could see a 649 FICO score as a risk, while another could see it as a perfectly acceptable score.
Remember, there are many different methods of calculating a credit score. If you're specifically interested in your FICO score, make sure the score you're looking at is labeled as such. You can purchase your Equifax and TransUnion FICO scores for $15.95 each with FICO Standard. Due to a dispute with Experian, there is no way for consumers to obtain their Experian FICO score.
8 Responses to “Will my FICO score be affected by the change in credit card interest rates and other things that have happened during the economic downturn?”
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May 18th, 2010 at 10:50 am
thank you for the reply to my comment/question,
however it descibes situations from 2 years ago. Since then credit card companies have dropped the higher limits down to almost the balance. Now that the gap has closed so much on everyones credit cards, will FICO do a new evaluation and change the formula?
May 18th, 2010 at 10:59 am
The latest revision was made in 2009 (last year) and it was the largest change to the FICO calculation in some time. Unfortunately, we don't have any personal insight into whether Fair Issac will make any future changes. That information is a closely guarded secret.
May 27th, 2010 at 9:52 am
[...] blender and generates your FICO score. Your FICO score (and everyone else's) is included in the national distribution of FICO scores provided by Fair Issac. Creditors draw their own conclusions from this [...]
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