Lauren Bunting

(March 6, 2020) The creator of the FICO score, Fair Isaac Corp, is going to make some changes to how credit scores are calculated.

They are going to score more harshly those with rising debt levels and those who fall behind on loan payments.

They will also flag certain consumers who sign up for personal loans, a category of unsecured debt that has surged recently.

The company says these changes will create a bigger gap between consumers deemed to be good and bad credit risks.

Consumers with already-high FICO scores of about 680 or higher who continue to manage loans well will likely get a higher score than under previous FICO versions.

Those with already-low scores below 600 who continue to miss payments or accumulate other black marks will experience bigger score declines than under previous models.

Even though consumer loan losses remain low compared to the height of the last recession, consumer debt is at record highs.

This is causing a shift in lender confidence, which has brought about these most recent changes to how FICO scores are calculated.

These changes are a reversal from recent years when credit reporting companies were implementing changes that helped increase scores through the use of removing some negative information like civil judgments from credit reports.

The FICO scoring model is updated every few years to allow for changes in consumer borrowing behavior and performance. The last set of changes was announced back in 2014.

These latest changes will affect the new versions of FICO scores, and lenders will be able to choose whether or not to adopt the new versions or stick with older versions, or even use competitor scoring systems such as Equifax and Experian.

– Lauren Bunting is an Associate Broker with Atlantic Shores Sotheby’s International Realty in Ocean City.

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