A:

FICO 8 is a credit-scoring system released in 2009. Since then, only a few lenders have adopted it. The vast majority of lenders still rely on FICO 2, 4 and 5 scores, which are all part of a larger report mortgage lenders can obtain called the residential mortgage credit report (RMCR). This report contains credit reporting on an individual from all three major credit reporting agencies: Equifax Inc. (EFX), Experian PLC (EXPN) and TransUnion (TRU). Mortgage lenders usually take the middle score from this report. For example, if your credit scores from the above agencies are 710, 690 and 610, the lender typically makes its decision based on the 690 score.

It is assumed that the majority of mortgage lenders have not adopted the new FICO 8 score because they are generally slow-moving entities, even in prosperous times. Also, due to the recent market crises, mortgage lenders have more urgent issues to consider. Note further that the lenders' FICO 2, 4, and 5 scoring systems have served the purpose.

The Major Changes to FICO 8

However, more lenders are likely to migrate to FICO 8, so it is important to understand the five reasons why it makes the score different.First, FICO 8 is more sensitive to highly used credit cards. Higher balances, even on frequently used and paid cards, may have more of a negative impact. Second, FICO 8 is more lenient to isolated late payments, but frequent late payments are penalized more. Third, FICO 8 is more careful with, and more sensitive to, authorized users on credit cards. Fourth, small-balance delinquencies of under $100 are ignored. Finally, consumers are divided into many more categorical profiles under FICO 8.

RELATED FAQS
  1. Why doesn't Credit Karma offer FICO scores?

    Credit Karma offers a popular way to track credit scores for free. While it does not offer FICO scores, the information it ... Read Answer >>
  2. What is the average credit score for new homebuyers? (ELLI)

    Learn the average FICO score of approved and denied home loan applications, and find out how your credit score measures up ... Read Answer >>
  3. How does refinancing my mortgage affect my FICO score?

    Learn some of the ways refinancing your mortgage could impact your FICO credit score, especially if you have held your current ... Read Answer >>
  4. How does the number of credit card accounts I have affect my credit score?

    Your credit score, which is also referred to as your FICO score, is a measure that creditors use to assess your potential ... Read Answer >>
Related Articles
  1. Personal Finance

    Understanding Your FICO Score

    Lenders use the FICO score to assess a loan applicant’s credit risk.
  2. Personal Finance

    Fico vs. Experian vs. Equifax: Their Pros and Cons (FICO, EFX)

    FICO, Experian and Equifax all provide information about a borrower's credit history. However, important differences exist between the three companies.
  3. Investing

    What Is The New 'FICO Score 9' And Its Benefits?

    A change in how some credit scores are calculated might soon make it easier for some homebuyers and homeowners to get a mortgage.
  4. Personal Finance

    How FICO Scores Are Calculated

    Lenders look at this to determine your credit risk. We explain what it is and how it's figured out.
  5. Personal Finance

    More Banks Offer Free (Actual) FICO Scores

    Lenders overwhelmingly use the FICO credit score when it comes to determining creditworthiness. And thanks to a new initiative, consumers can see it too.
  6. Managing Wealth

    Can You Hit The Highest Credit Score?

    Yes – it's doable. But the real question is, does it matter?
  7. Investing

    5 Things You Need For A Good Credit Score

    How good a credit score you have depends on 5 factors. What they are and what it takes to better your credit rating if it's not as high as you'd like.
  8. Personal Finance

    Common Things That Improve And Lower Credit Scores

    Credit scores are used by lenders to estimate credit risk. Find out how you can better earn the trust of lenders and reap the benefits.
  9. Investing

    What Lenders Look at on Your Credit Report

    What do lenders consider when they look at your credit report? It’s a simple question with a complicated answer.
  10. Personal Finance

    What Lenders Look At On Your Credit Report

    What do lenders consider when they look at your credit report? Several things, including your income and payment history.
RELATED TERMS
  1. FICO Score

    A type of credit score that makes up a substantial portion of ...
  2. FAKO Score

    A derogatory term for a credit score that is not one of the FICO ...
  3. Beacon Score

    A number generated by the Equifax Credit Bureau to rank an individual's ...
  4. FICO (Fair Isaac)

    A major analytics software company that provides products and ...
  5. VantageScore

    A consumer credit rating product developed by three credit rating ...
  6. FICO 08

    A credit-scoring model introduced in 2009 by the FICO company ...
COMPANIES IN THIS ARTICLE
Trading Center