Making the difference – Is your credit score good enough?

A few days ago I decided to write about a report from one of the creator of the most widely used credit score, I think you know about who am I talking about, that is right, FICO. That report analyzed data from one reporting bureau called Equifax, showing a great increase in the proportion of people in the top branch of credit scores and a significant decrease in the lowest branch.

Here I found a misunderstanding because FICO actually forgot to mention that the analysis was not made using the FICO score version that most people use but a brand new one called FICO 8. After discovering this I decided to confront Rachel Bell from FICO Labs, which told me that the usage of FICO 8 had nothing to do, after all, even if an older scoring model was used, the trend would remain the same. I figured out that this might be true after all. But still, people will be confused and I suggested them to clarify on what version of the score the report was based. There is enough confusion among customers because they hardly understand how these processes work and most of them still do not have access to FICO 8.
The FICO 8 was introduced on the market on 2009 and it is based on a formula that has been improved in order to better predict borrower risk. According to Ms Bell, the goal of this version is to better identify the risks. FICO 8 scores are more understanding and forgiving if we could say so.

If we took a look at the both versions we would see that FICO 8 scores within 20 points of their scores under the pervious one. That might be considered a great improvement and because it has the ability to predict credit risk, people that have good credit score range habits might see that their scores went up, while the ones that are not so careful might see theirs go down.

They want lenders to use the most current version of FICO as soon as possible, but that would take time. According to their website, more than 7.600 creditors are using the latest version, but they would not say how many people are still using the older version. A spokesman said in an email that lenders have adopted this new version of FICO faster than expected, actually, faster than any other model. He also said that some lenders want to know what is new and get easily adapted to the new changes, another part of them chooses to get stuck on an older version, and another part is stuck somewhere in the middle.

But still, FICO 8 is not the most used formula because many of the customers cannot buy access to their FICO 8 scores on the company’s customer site. Even if they tried to offer access to the scores that are mostly used, until FICO 8 becomes more widely known, there is nothing to do; people will use the older versions. Go ahead and check your score right now!


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