FICO10: What to Expect

FICO recently announced the change to FICO 10. When it comes to purchasing or refinancing a home, FICO’s credit score changes probably won’t make a difference, but here’s some changes to expect.

The introduction of FICO 10, the updated scoring model coming this summer, has caused some concern that scores will likely drop by 20 points or so for millions of U.S. consumers. For those affected, accessing credit may become more difficult and more expensive.

Those who carry a lot of debt will likely be most affected by the new model. Moving high credit balances around or consolidating them into personal loans may cut interest expenses, but if you never pay them off, your amount of debt continues to build. Your credit score will benefit most if you pay those balances down.

The FICO 10T, one version of the new model, looks more closely at how individuals have managed their credit over the last 2+ years. The basics of good credit remain the same. In order of importance to your score: pay your bills on time and pay more than the minimum, keep usage under 30% of limit, keep old accounts open to preserve length of credit history, avoid new credit and keep a mix of credit types in use.

The good news is that most mortgage lenders will not immediately adopt the new model. Many still use FICO versions 2, 4 or 5 which means if the new FICO 10 will negatively affect you, you may have time to focus on raising your score first.

If you are wondering about how this change could affect your ability to get a mortgage or refinance, contact one of our loan officers.