What's changing?

Hands holding plastic credit card and using laptop. Online shopping concept. Toned picture
Yulia Grigoryeva / Shutterstock
The new version will take into account credit card usage over a two-year period.

Fair Isaac Corp., the company responsible for FICO scores, has announced a change that will penalize consumers if they allow their debt levels to rise, or if they fall behind on their loan payments, as first reported by The Wall Street Journal.

The update will factor in how a consumer uses credit cards over a 24-month period — and if you tend to carry high balances, your score will take a hit. The new FICO scores also give more weight to unsecured personal loans, which could hurt some borrowers.

Under the new scoring criteria, consumers with good credit scores — 680 or higher — will likely see an increase in their scores if they stay on top of their loan payments.

However, those with fair or poor credit scores — 600 or lower — who miss payments or accumulate debt will see bigger declines in their scores than under previous FICO versions.

More: Find out where you stand with free credit score and credit monitoring from Credit Sesame.

What's the impact?

FICO sign on headquarters of Fair Isaac Corporation in Silicon Valley. FICO is  a data analytics company focused on credit scoring services - San Jose, California, USA - June 16, 2019
Michael Vi / Shutterstock
FICO says a minority of consumers will see major changes in their scores.

FICO officials say the majority of consumers, roughly 110 million, will see changes in their credit scores of less than 20 points, either up or down.

Another 80 million will see bigger swings — in either direction.

The changes will widen the gap between consumers who are already considered to be good or bad credit risks, and will likely lead to a shift in the average FICO score, which hit a record high of 703 in 2019, according to an annual report from the credit bureau Experian.

In a news release, FICO says it expects its new system will result in an up to 10% reduction in credit card defaults and as much as a 17% decline in defaults by new mortgage borrowers.

The new scoring model marks a stark reversal from FICO changes in previous years, which aimed to help build scores for people with little or no credit history, and remove certain pieces of negative information — like civil judgments and tax liens — from many credit reports.

If you're looking for a quick and easy boost to your FICO score, try Experian Boost™. You can get credit for paying your phone bills, utilities, and even streaming services like Netflix and Disney+.

Although it’s unclear when lenders will begin using FICO’s new model, if you’re not sure about the current status of your credit rating it may be a good idea to check your credit score for free using a personal credit management company like Credit Sesame.

About the Author

Shane Murphy

Shane Murphy


Shane is a reporter for MoneyWise. He holds a bachelor’s degree in English Language & Literature from Western University and is a graduate of the Algonquin College Scriptwriting program.

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