If you’ve ever gotten a FICO credit score, you might recall that FICO scores range from 300 to 850.Many people are aware that the FICO credit score is the trusted standard, but did you know there are different versions of the FICO score? Many creditors are now using the FICO® Score 8 model which in almost all cases increases the borrower’s credit score substantially. A challenge that many are now finding is understanding which creditor is using the model to where the borrower has the best score or are you correcting items on your credit that are omitted with the new FICO® Score 8 program.
How is FICO® Score 8 different from previous versions?
While the underlying foundation of FICO® Score 8 is consistent with previous versions, there are several unique features that make FICO® Score 8 a more predictive score:
High credit card usage
While all FICO® Score versions consider high credit card utilization to be reflective of higher risk, FICO® Score 8 is more sensitive to highly utilized credit cards. So if a credit report shows a high balance close to the card’s limit, FICO® Score 8 will likely be more impacted than a previous score version.
Keeping credit card balance low can help maintain or improve the score.
Isolated late payments
If a lender reports to the credit bureau that you were at least 30 days late with your payment, it will likely result in a loss of points with all FICO® Score versions. If the late payment is an isolated event and other accounts are in good standing, FICO® Score 8 is more forgiving compared with previous FICO® Score versions.
However, if the credit report shows numerous late payments, the reverse is true and FICO® Score 8 will likely lose more points.
Authorized user of credit card
All FICO® Score versions include authorized user credit card accounts when calculating a score. This can help people benefit from their shared management of a credit card account. It also helps lenders by providing scores that are based on a full snapshot of the consumer’s credit history.
To protect lenders and honest consumers, FICO® Score 8 substantially reduces any benefit of so-called tradeline renting. That’s a credit repair practice that entices consumers into being added to a stranger’s credit account in order to misrepresent their credit risk to lenders.
Small-balance collections accounts
FICO® Score 8 ignores small-dollar “nuisance” collection accounts in which the original balance was less than $100.